Homework Answers
| Computation of bond price | |||
| Table values are based on: | |||
| n= | 20 | ||
| i= | 2% | ||
| Cash flow | Table Value | Amount | Present Value |
| Par (Maturity) Value | 0.67297 | $ 6,200,000 | $ 4,172,422 |
| Interest (Annuity) | 16.35143 | $ 93,000 | $ 1,520,683 |
| Price of bonds | $ 5,693,106 | ||
| Journal Entries - Lucky Company | |||
| Date | Particulars | Debit | Credit |
| 1-Jan-20X2 | Investment in bond | $ 6,200,000 | |
| To Cash | $ 5,693,106 | ||
| To Discount on bond investment | $ 506,894 | ||
| (To record investment in bond) | |||
| 30-Jun-20X2 | Cash | $ 93,000 | |
| Discount on bond investment | $ 20,862 | ||
| To Interest Income | $ 113,862 | ||
| (To record interest revenue using effective interest) | |||
| 31-Dec-20X2 | Cash | $ 93,000 | |
| Discount on bond investment | $ 21,279 | ||
| To Interest Income | $ 114,279 | ||
| (To record interest revenue using effective interest) | |||
| 31-Dec-20X2 | Fair value adjustment | $ 64,753 | |
| To Unrealized holding gain or loss - NI | $ 64,753 | ||
| (To adjust bond investment to fair value) | |||
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