Question

Bringham Company issues bonds with a par value of $660,000 on their stated issue date. The bonds mature in 10 years and pay 9% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 12%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. What is the amount of each semiannual interest payment for these bonds? 2. How many semiannual interest payments will be made on these bonds over their life? 3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. 4. Compute the price of the bonds as of their issue date. 5. Prepare the journal entry to record the bonds' issuance. Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Reg 5 What is the amount of each semiannual interest payment for these bonds? How many semiannual interest payments will be made on these bonds over their life? Use the Interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. Par (maturity) value Semiannual Rate Semiannual cash interest payment Number of payments Whether the bonds are issued at par, at a discount, or at a premium? Req 1 to 3 Req4>

Answer 1

Solution 1 to 3:

Par (Maturity) Value	*	Semiannual Rate (9%/2 = 3.50%)	=	Semiannual Cash Interest Payment
$6,60,000	*	4.50%	=	$29,700
Number of Payments (10 years *2)				20
Whether bonds issued at par, at a discounts or at a premium?				At a discount (Because coupon rate is less than Market rate)

Solution 4:

Chart Values are based on:
n= (10 Years*2)	20	Half years
i= (12%/2)	6%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Par (Maturity) Value	0.3118	*	$6,60,000	=	$2,05,788
Interest (Annuity) [$660,000*9%*6/12]	11.4699	*	$29,700	=	$3,40,656
Price of Bonds					$5,46,444

Solution 5:

Transaction	General Journal	Debit	Credit
1	Cash Dr	$5,46,444
	Discount on bond payable	$1,13,556
	To Bond Payable		$6,60,000
	(To record issue of bonds)