Cheyenne Co. is building a new hockey arena at a cost of $2,460,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $1,960,000 to complete the project. It therefore decides to issue $1,960,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%.
(a)
Prepare the journal entry to record the issuance of the bonds on
January 1, 2019. (Round present value factor calculations to 5
decimal places, e.g. 1.25124 and the final answer to 0 decimal
places e.g. 58,971. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. Credit account
titles are automatically indented when amount is entered. Do not
indent manually.)
Date Account Titles and Explanation Debit Credit
January 1, 2019
Proceeds from bond is calculated as present value of coupon amount and present value of par value of bond | |||||||
Proceeds from bond | 1960000*10%*PV of annuity of $1(i=9%,n=10) + 1960000*PV of $1 (i=9%, n=10) | ||||||
Proceeds from bond | (196000*6.41766)+(1960000*0.42241) | ||||||
Proceeds from bond | $2,085,786 | ||||||
Record journal entry for issue of bonds | |||||||
General Journal | Debit | Credit | |||||
Cash | $2,085,786 | ||||||
Bonds payable | $1,960,000 | ||||||
Premium on bonds payable (2085786-1960000) | $125,786 | ||||||
Cheyenne Co. is building a new hockey arena at a cost of $2,460,000. It received a...
Flounder Co. is building a new hockey arena at a cost of
$2,460,000. It received a downpayment of $500,000 from local
businesses to support the project, and now needs to borrow
$1,960,000 to complete the project. It therefore decides to issue
$1,960,000 of 10%, 10-year bonds. These bonds were issued on
January 1, 2019, and pay interest annually on each January 1. The
bonds yield 9%.
Prepare the journal entry to record the issuance of the bonds
on January 1,...
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