Question

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Hartford Research issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds have a $22,000 par value and an annual contract rate of 12%, and they mature in 10 years (able B1. Table B 2. Table B3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Required: Consider each of the following three separate situations 1. The market rate at the date of issuance is 10% (a) Complete the below table to determine the bonds' issue price on January 1, 2017 (b) Prepare the journal entry to record their issuance. 2. The market rate at the date of issuance is 12% (a) Complete the below table to determine the bonds issue price on January 1, 2017 (b) Prepare the journal entry to record their issuance. 3. The market rate at the date of issuance is 14% (a) Complete the below table to determine the bonds'issue price on January 1, 2017 (b) Prepare the journal entry to record their issuance,

Answer 1

1)	Market rate is 10%
	Table values based on:
	n	=	20
	i	=	5%
	Cash flow		Table Value	Amount	PV
	Par (maturity) value		0.3769	$      22,000	$         8,292
	Interest (annuity)		12.4622	$         1,320	$      16,450
	Price of bonds				$      24,742

Entry
Date	Particulars			Debit	Credit
Jan 1, 2017	Cash			$ 24,742
	To Premium on issue of bond				$         2,742
	To Bonds Payable				$ 22,000.00

2)	Market rate is 12%
	Table values based on:
	n	=	20
	i	=	6%
	Cash flow		Table Value	Amount	PV
	Par (maturity) value		0.3118	$      22,000	$         6,860
	Interest (annuity)		11.4699	$         1,320	$      15,140
	Price of bonds				$      22,000

Entry
Date	Particulars			Debit	Credit
Jan 1, 2017	Cash			$ 22,000
	To Bonds Payable				$ 22,000.00

3)	Market rate is 14%
	Table values based on:
	n	=	20
	i	=	7%
	Cash flow		Table Value	Amount	PV
	Par (maturity) value		0.2584	$      22,000	$         5,685
	Interest (annuity)		10.594	$         1,320	$      13,984
	Price of bonds				$      19,669

Entry
Date	Particulars			Debit	Credit
Jan 1, 2017	Cash			$ 19,669
	Discount on issue of bond			$    2,331
	To Bonds Payable				$ 22,000.00

Will you please let me know whether this is correct or not?