Question

Park Corporation is planning to issue bonds with a face value of $610,000 and a coupon rate of 7.5 percent. The bonds mature in 6 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1. PV of $1. FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) Required: 1.&2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. 3. What bonds payable amount will Park report on its June 30 balance sheet? Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 What bonds payable amount will Park report on its June 30 balance sheet2 (Enter all amounts as positive values.) PARK CORPORATION Balance Sheet (Partial) At June 30 Long-term liabilities Bonds payable

Answer 1

Table values are based on:
Face Amount	$610,000
Interest Payment	$610,000*7.5%*6/12 =$22,875
Market Interest rate per period	4.25%
Cash Flow	Table Value(PV of 4.25% for 12 period)	Amount	Present Value
PV of Interest	9.25039	$22,875	$2,11,603
PV of Principal	0.60686	$6,10,000	$3,70,185
PV of Bonds Payable(Issue Price)			$5,81,787
Discount on Bonds =$610,000 - $581,787 =$28,213
Date	Cash Paid($610,000*3.75%)	Interest expenses(Bond carrying amount*4.25%)	Increase in carrying value	Bond carrying amount
Col I	Col II	Col III	Col IV(Col III - Col II)	Col V
Issue date				$                            5,81,787
Period 1	$                                                      22,875	$                                                               24,726	$                                      1,851	$                            5,83,638
Period 2	$                                                      22,875	$                                                               24,805	$                                      1,930	$                            5,85,568
Period 3	$                                                      22,875	$                                                               24,887	$                                      2,012	$                            5,87,579
Period 4	$                                                      22,875	$                                                               24,972	$                                      2,097	$                            5,89,677
Period 5	$                                                      22,875	$                                                               25,061	$                                      2,186	$                            5,91,863
Period 6	$                                                      22,875	$                                                               25,154	$                                      2,279	$                            5,94,142
Period 7	$                                                      22,875	$                                                               25,251	$                                      2,376	$                            5,96,518
Period 8	$                                                      22,875	$                                                               25,352	$                                      2,477	$                            5,98,995
Period 9	$                                                      22,875	$                                                               25,457	$                                      2,582	$                            6,01,577
Period 10	$                                                      22,875	$                                                               25,567	$                                      2,692	$                            6,04,269
Period 11	$                                                      22,875	$                                                               25,681	$                                      2,806	$                            6,07,076
Period 12	$                                                      22,875	$                                                               25,799	$                                      2,924	$                            6,10,000
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Issue date	Cash	$                                                            5,81,787
	Discount on Bonds Payable		$                                    28,213
	Bond Payable		$                                 6,10,000
Period 1	Interest expenses	$                                                               24,726
	Cash		$                                    22,875
	Discount on Bonds Payable		$                                      1,851
	PARK CORPORATION
	Balance Sheet(Partial)
	At June 30
	Long-Term Liabilities
	Bonds Payable	$6,10,000
	Unamortized Discount	$26,362
	Net Bonds payable as on June 30		$5,83,638