Solution 1a:
Computation of bond price | |||
Table values are based on: | |||
n= | 40 | ||
i= | 7.00% | ||
Cash flow | Table Value | Amount | Present Value |
Par (Maturity) Value | 0.06678 | $55,000,000.00 | $3,672,900 |
Interest (Annuity) | 13.33171 | $3,300,000.00 | $43,994,643 |
Price of bonds | $47,667,543 |
Solution 1b:
Journal Entries - Instaform Inc. | |||
Event | Particulars | Debit | Credit |
1-Jan-21 | Cash Dr | $47,667,543.00 | |
Discount on issue of bond Dr | $7,332,457.00 | ||
To Bond Payable | $55,000,000.00 | ||
(To record issue of bond at discount) |
Solution 2a:
Computation of bond price | |||
Table values are based on: | |||
n= | 40 | ||
i= | 5.50% | ||
Cash flow | Table Value | Amount | Present Value |
Par (Maturity) Value | 0.11746 | $55,000,000.00 | $6,460,300 |
Interest (Annuity) | 16.04612 | $3,300,000.00 | $52,952,196 |
Price of bonds | $59,412,496 |
Solution 2b:
Journal Entries - Instaform Inc. | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Cash Dr | $59,412,496.00 | |
To Bond Payable | $55,000,000.00 | ||
To Premium on Bond Payable | $4,412,496.00 | ||
(To record issue of bond at premium) |
Solution 3:
Journal Entries - Broadcourt Electronics | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Investment in Bond Dr | $55,000,000.00 | |
Premium on bond investment Dr | $4,412,496.00 | ||
To Cash | $59,412,496.00 | ||
(To record investment in bond) |
On January 1, 2021, Instaform, Inc., issued 12% bonds with a face amount of $55 million,...
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