Question

The Bradford Company issued 14% bonds, dated January 1, with a face amount of $84 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 16%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD 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, 2021. 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate). Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 to 4 Determine the price of the bonds at January 1, 2021. (Enter your answers whole dollars.) Table values are based on: n = ZU i = Cash Flow 8.0% Amount 5,880,000 Present Value Interest $ Principal $ 84,000,000 Price of bonds

Answer 1

1) 20 Table values are Based on: n= 8% Cash Flow Table Amount Value Interest 9.81815 x $5,880,000 = Principal 0.21455 x 584,000,000 = Price of bonds Present Value $57,730,722 $18,022,200 $75,752,922 Workings: Interest ($84.000.000 * 14%*6/12) $5.880.000 2) Credit Date January 01, 2021 General Journal Debit Cash $75.752.922 Discount on bonds payable $8.247.078 Bonds Payable (To record the issuance of the bonds for cash) $84,000,000 June 30, 2021 $6,060,234 Interest Expense ($75,752,922 * 8%) Discount on bonds payable Cash ($84,000,000 * 7%) (To record the interest) $180,234 $5,880,000 $6,074,652 December 31, 2021 Interest expense Discount on bonds payable Cash ($84.000.000 * 7%) (To record the interest) $194.652 $5,880,000 Workings: Interest expense [($75,752.922 + $180,234) * 8%] $6,074,652