Question

On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $70 million, dated January 1. The bonds mature in 2040 (20 years). The market yield for bonds of similar risk and maturity is 14%. Interest is paid semiannually (FV of S1, PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2021. 1-b. Prepare the journal entry to record their issuance by Instaform. 2-0. Assume the market rate was 11%. Determine the price of the bonds at January 1, 2021 2-b. Assume the market rate was 11%. Prepare the journal entry to record their issuance by Instaform 3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Red 2A Req 28 Req3 Determine the price of the bonds at January 1, 2021. (Enter your answer in whole dollars.) Price of the bonds

Answer 1

Answer Om Price of the bends Jani, 2012! Present value of face amount = face amount x Pv(89, yoycasus) = $ 70 million X-L .19.. = +) (1++%)" (20x2 = young) = 40,000,000 X 0.066480 = $ 4674600 Present value of interests amourt = Interest x PV 19 (4%, 40gr) = ( to million, 127.) x +41+47540 = 42 million x 13,3317|| = 4200,000 X 13.33145 = $ 55993182 Price of the bonds - 4674600 + 55993182 67782 : 1. Price of the bonds at Jan 1, 2018 = $60,667,482

Page No ③ KALA vi 06 Journal entry to recome thing wance by instaboo Discount on bonds payable = 70,000,000 – $60,664,482 <$9332218 Particular | Debit | Credit Cash $60,667,482 - 2021 Discount on bonds payable $933 2,218- Bonds payable $ 40,000,000 Date @@ Interverf paid semiannually , market rate = " =55% Present value of face amount = face amount x PV (5157.340 yrs) 40,000,000 X (145.5)"0 = 40,000,000 X 0.11746 = $8222200 Presents value of interest amount : Interest x PUIT (5.5%, yo yra = (40,000,000x 12.7 x ! - (146157)" - 5.5% = 4,200,000 X 16.04612 = $ 67,393,404

Page no ® Price of the bonds - $222200 + 64,393,704 = $ 75,615,904 ha Price of the bonds at Jan 1, 2001 = $ 45,616,904 20 Journal entry to record their quance by intakerm Premium on bonds payable e 5,615,904 – 70,000,000 + $5,615,904 Particular Debit Credit Cash $ 45,615,904 Premium on bonds payable $5,615,904 Bond payable $ 40,000,000 4 или © Jornal enböy to record the purchase by Bread count Particular Debit Credit Investment in bond $ 70,000,000 Premium on bond investment $ 5,615,904 $45,615,904 cash