Question

P12AB-38A (similar to) Que 2018, when the market interest rate is 16%, the company issues $200,000 of the bonds. The bonds pay interest semiannually. Calming. Inc. is authorized to issue 14%, 10-year bonds payable. On January (Click the icon to view Present Value of $1 table.) (Click the ioon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. How much cash did the company recelve upon issuance of the bonds payable? (Round to the nearest dollar.) Upon issuance of the bonds payable, the company received $ Requirements 1 How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.) 2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round to the nearest dollar.) 3. Journalize the issuance of the bonds on January 1, 2018, and the first and second payments of the semiannual interest amount and amortization of the bonds on June 30, 2018 and December 31, 2018. Explanations are not required. Print Done

Answer 1

Solution 1:

Computation of bond price
Table values are based on:
n=	20
i=	8.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.21455	$200,000.00	$42,910
Interest (Annuity)	9.81815	$14,000.00	$137,454
Price of bonds			$180,364

Solution 2:

Bond Amortization Schedule - Effective interest method
Date	Interest paid	Interest Expense	Discount Amortization	Unamortized Discount	Book value of bonds End of period
Issue date				$19,636	$180,364
30-Jun-18	$14,000	$14,429	$429	$19,207	$180,793
31-Dec-18	$14,000	$14,463	$463	$18,743	$181,257

Solution 3:

Journal Entries - Calming Inc.
Date	Particulars	Debit	Credit
1-Jan-18	Cash Dr	$180,364.00
	Discount on bond Payable Dr	$19,636.00
	To Bond Payable		$200,000.00
	(To record issue of bond at discount)
30-Jun-18	Interest Expense Dr	$14,429.00
	To Discount on bond payable		$429.00
	To Cash		$14,000.00
	(To record interest payment and discount amortization)
31-Dec-18	Interest Expense Dr	$14,463.00
	To Discount on bond payable		$463.00
	To Cash		$14,000.00
	(To record interest payment and discount amortization)