Question

Question 3 On January 1, 2018, Carvel Corp. issued five-year bonds with a face value of $620,000 and a coupon interest rate of 6%, with interest payable semi-annually. Assume that the company has a December 31 year end and records adjusting entries annually. (a) Your answer is partially correct. Try again. Record the journal entries relating to the bonds on January 1, July 1, and December 31, assuming that when the bonds were sold, the market interest rate was 5%. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275.) Debit Credit Date Account Titles and Explanation Jan. 1 cash Bonds Payable July 1 Bonds Payable PPPP- Tinterest Expense Cash Dec 31 Bonds Payable Interest Expense Cash

Answer 1

Issue Price of Bond

PV of Maturity Value	$      6,20,000	0.7813	$      4,84,406
PV of Interest Payments	$          18,600	8.7524	$      1,62,795
			$      6,47,201

Date	Account Titles	Debit	Credit
Jan-01	Cash	$      6,47,201
	Bonds Payable		$      6,47,201
Jul-01	Bonds Payable	$            2,420		=18600-16180
	Interest Expense	$          16,180		=647201*5%*6/12
	Cash		$          18,600
Dec-31	Bonds Payable	$            2,480		=18600-16120
	Interest Expense	$          16,120		=(647201-2420)*5%*6/12
	Interest Payable		$          18,600