Solution 1:
Computation of bond price | |||
Table values are based on: | |||
n= | 20 | ||
i= | 4.25% | ||
Cash flow | Table Value | Amount | Present Value |
Par (Maturity) Value | 0.43499 | $2,600,000.00 | $1,130,974 |
Interest (Annuity) | 13.29437 | $130,000.00 | $1,728,268 |
Cash Proceed from sale of bond | $2,859,242 |
Journal Entries - Park Corporation | |||
Date | Particulars | Debit | Credit |
1-Jan | Cash Dr | $2,859,242.00 | |
To Bond Payable | $2,600,000.00 | ||
To Premium on Bond Payable | $259,242.00 | ||
(To record issue of bond at Premium) |
Solution 2:
Journal Entries - Park Corporation | |||
Date | Particulars | Debit | Credit |
30-Jun | Interest expense Dr ($2,859,242*8.50%*6/12) | $121,518.00 | |
Premium on bond payable Dr | $8,482.00 | ||
To Cash | $130,000.00 | ||
(To record interest expense and premium amortization) |
Solution 3:
Park Corporation | ||
Balance Sheet (Partial) | ||
As of June 30 | ||
Particulars | Amount | |
Long term liabilities: | ||
Bond Payable | $2,600,000.00 | |
Add: Unamortized premium | $250,760.00 | |
Net Bond Liability | $2,850,760.00 |
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