Question

Sheridan Ltd. sold $7,060,000 of 12% bonds, which were dated March 1, 2020, on June 1, 2020. The bonds paid interest on September 1 and March 1 of each year. The bonds' maturity date was March 1, 2030, and the bonds were issued to yield 14%. Sheridan's fiscal year-end was February 28, and the company followed IFRS. On June 1, 2021, Sheridan bought back $3,060,000 worth of bonds for $2,960,000 plus accrued interest. Using 1. a financial calculator, or 2. Excel function PV, calculate the issue price of the bonds and prepare the entry for the issuance of the bonds. (Hint: Use the account Interest Payable in your entry). (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation

Answer 1

Excel function DATA Face value of Bonds Contract rate of interest Term of bonds Market rate of interest Interest payment $7,060,000 12% 10 14% semi-annual Issue price of the bond Amount $6,312,063 Formulas |--PV((G10/2),(G9*2),(G7*(G8/2)),G7) Credit Debit $6,523,863 $747,937 Date Account Titles and Explanation June 1, 2020 Cash Discount on issue of bonds Bond payable Interest payable (To record issue of bonds) $7,060,000 $211,800 $7,060,000*12%/12*3