Question

2 The Bradford Company issued 12% bonds, dated January 1, with a face amount of $95 million on January 1, 2018. The bonds mature on December 31, 202700 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (EV of S1 PY of $1. EVA of $1. PVA of $1, EVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2018 2. to 4. Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2018 (at the effective rate). Book Complete this question by entering your answers in the tabs below Hnt Req 1Req 2 to4 Print

Answer 1

Ans-1- Determining the price of the bonds at January 1, 2018:-

Table values are based on:-
n=	20
i=	7.0%
Cash Flow	Amount	Present Value
Interest	$5,700,000	$60,385,857
Principal	$95,000,000	$24,549,900
Price of bonds		$84,935,757

Journal Entries:-

Date	Account Titles And Explanation	Debit ($)	Credit ($)
Jan.1,2018	Cash A/c Dr.	84,935,757
	Discount on bonds payable A/c Dr.	10,064,243
	Bonds Payable A/c		95,000,000
	(To record the issuance of bonds)
June 30,2018	Interest Expense A/c Dr.($84,935,757* 7%)	5,945,503
	Discount on bonds payable A/c		245,503
	Cash a/c		5,700,000
	(To record the interest expense on June 30,2018)
Dec.31,2018	Interest Expense A/c Dr.($85,181,260*7%) ($84,935,757+ $245,503=$85,181,260)	5,962,688
	Discount on bonds payable A/c		262,688
	Cash A/c		5,700,000
	(To record the interest expense on December 31,2018)

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