Question

Bringham Company issues bonds with a par value of $650,000. The bonds mature in 5 years and pay 6% annual interest in semiannual payments. The annual market rate for the bonds is 8%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

1. Compute the price of the bonds as of their issue date.
2. Prepare the journal entry to record the bonds’ issuance.

Compute the price of the bonds as of their issue date. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round intermediate calculations to the nearest dollar amount.)

(I do not understand how to find table value or i) ( I do know table value is supposed to be multiplied by the amount)

	Table Values are Based on: n = 10 i = ? Cash Flow Table Value Amount Present Value Par (maturity) value ? 650000 ? Interest (annuity) ? 19500 ? Price of bonds ?

• Record the issuance of the bonds for cash.

• Journal entry worksheet

Answer 1

Face Value of Bonds = $650,000

Annual Coupon Rate = 6.00%
Semiannual Coupon Rate = 3.00%
Semiannual Coupon = 3.00% * $650,000
Semiannual Coupon = $19,500

Time to Maturity = 5 years
Semiannual Period = 10

Annual Interest Rate = 8.00%
Semiannual Interest Rate = 4.00%

Table values are based on: 10 4.00% Cash Flow Table Value Par value 0.6756 $ Interest 8.1109 $ Price of bonds Amount Present Value 650,000 $ 439,140 19,500 $ 158,163 $ 597,303

PVA of $1 (4.00%, 10) = 8.1109
PV of $1 (4.00%, 10) = 0.6756

Journal entry to record issuance of common stock is:

Credit General Journal Cash Discount on Bonds Payable Cash Debit 597,303 52,697 650,000