Question

Exercise 9-48 (Algorithmic)

Bond Premium and Discount

Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $800.

1. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30.
$   

2. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10.
$   

3. Calculate how much Markway is able to borrow if each bond is sold at 92 percent of par.
$   

4. Calculate how much Markway is able to borrow if each bond is sold at 103 percent of par.
$   

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Calculate selling price of bond, premium + issue price.

Calculate selling price of bond, issue price - discount.

This is the percentage of face value a bond is issued (sold). Amounts less than 100 are sold at a discount. Calculate selling price of bond, issue price - discount.

This is the percentage of face value a bond is issued (sold). Amounts more than 100 are sold at a premium. Calculate selling price of bond, premium + issue price.

Hide 5. Assume that the bonds are sold for $771 each. Prepare the entry to recognize the sale of the 750 bonds. If an amount box does not require an entry, leave it blank. Record issuance of bonds at discount

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The difference between the selling price and issue price is either a discount or premium. Record cash received and debt of bonds payable. Difference goes to discount on bonds payable.

Hide 6. Assume that the bonds are sold for $843 each. Prepare the entry to recognize the sale of the 750 bonds. If an amount box does not require an entry, leave it blank. Record issuance of bonds at premium

Answer 1

1	$622,500
	(750 bonds x $830)
2	$592,500
	(750 bonds x $790)
3	$552,000
	(750 bonds x $800 x 0.92)
4	$618,000
	(750 bonds x $800 x 1.03)
5
	General Journal	Debit	Credit
	Cash	$578,250		(750 bonds x $771)
	Discount on Bonds Payable	$21,750		Balance
	Bonds Payable		$600,000	(750 bonds x $800)
	(Record issuance of bonds at discount)
6	General Journal	Debit	Credit
	Cash	$632,250		(750 bonds x $843)
	Bonds Payable		$600,000	(750 bonds x $800)
	Premium on Bonds Payable		$32,250
	(Record issuance of bonds at a premium)