On January 1, 2018, Watch Works Incorporated (WWI) issued $78,000 par value, 1%, four-year bonds that...

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On January 1, 2018, Watch Works Incorporated (WWI) issued $78,000 par value, 1%, four-year bonds that mature on December 31, STEP 2 - Present Value of Par Value: PV 1. (1+/Y) Present Value of Interest Payment + Present Value of Par Value = Journalize

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Answer 1

Answer #1

Step: 1 present value of interest payment
PV ordinary annuity	=	PMT	x		(1	-	(1+i/y)	^	-N	)/	i/y
	=	390	x		(1		(1.05)		-8		5%
	=	390	x	6.46321
	=	$2456

Step: 2 present value of par value

PV

=

PV

x

(1

/

(1+i/y)

^

N

)

=

78000

x

(1

(1.05)

8

=

78000

x

0.67684

=

$52794

present value of interest payment

+

present value of par value

=

$55250

January 1, 2018
Accounts	Debit	Credit
Cash	55250
Discount on bonds payable	22750
Bonds payable		78000

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Answer 2

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