Question

in part A just need the correct answers in red boxes were I made mistakes. Thanks!

Wildhorse Corporation issued $3.54 million of 7- year, 6% bonds dated January 1, 2021, for $3,166,065. The market interest rate when the bonds were issued was 8%. Interest is payable semi-annually on January 1 and July 1. Wildhorse has a December 31 year end.

Answer 1

Solution 1) Face Value of Bonds PV factor (8%/2, 7 years x2) Present Value of Face Value $ 3,540,000 0.57748 $ 2,044,279 (a) Interest @ 3% - semi annually PV of Annuity factor (8%/2, 7 years x2) Present Value of Interest $ 106,200 10.56312 $ 1,121,803 (b) Issue Price of Bond (a+b) $ 3,166,083 Premium on Issue ($891,644 - $860,000) $ 373,917 WILDFORSE CORPORATION Bond Amortization Table Effective Interest Method - Semi Annual Interest Payments 6% Bonds Issued at market rate of 8% Bond Interest Interest Discount Amortized Date Payment Expense Amortization Cost Jan 1,2021 0 0 0 $ 3,166,083 Jul 1, 2021 $ 106,200 $ 126,643 $ 20,443 $3,145,639 Jan 1,2022 $106,200 $ 125,826 $ 19,626 $ 3,126,014 Jul 1, 2022 $ 106,200 $ 125,041 $ 18,841 $ 3,107,173

Solution 2) Sheridan Inc. Date Payment Interest Principal Closing Bal. Nov 30, 2021 $ 336,000 Dec 31, 2021 $ 3,730 $ 1,680 $ 2,050 $ 333,950 Jan 31, 2021 $ 3,730 $ 1,670 $ 2,060 $ 331,890 Credit Debit $ 336,000 $336,000 $ $ 1,680 2,050 Date Accounts Nov 30, 2021 Building Note Payable (To record issuance of note) Dec 31, 2021 Interest Expense Note Payable Cash (To record payment of note) Jan 31, 2021 Interest Expense Note Payable Cash (To record payment of note) $ 3,730 $ $ 1,670 2,060 $ 3,730

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