Question

Park Corporation is planning to issue bonds with a face value of $770,000 and a coupon rate of 7.5 percent. The bonds mature in 8 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) Required 1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Date General Journal Debit Credit 1January 01 Bonds payable 770,000 Cash 770,000

Answer 1

2 Tables Values are Based on: 16 4.25% 1 Table Value Present Value S395,616 Cash Flow Amount 6 Future 7 Interest (annuity) 8 Issue price of bonds 0.5138 11.4403 $770,000 S28,875 value S725,955 10 Date Account Titles and Explanation Debit Credit Cash Discount on bonds 725,955 $44,045 an 12 13 14 15 16 2 Bonds payable o record issuance of bonds) 770,000 Debit Date June. 30 Account Titles and Explanation Credit 18 19 20 21 Interest S30,853 Discount on bonds Cash $1,978 S28,875 o record interest 23 3 PARK CORPORATION Balance Sheet (Partial) At June 30 24 25 26 Bonds payable 27 Less: Discount on bonds 28 term liabilities: S770,000 S42,067 $727,933

Calculations are shown below: 2 Tables Values are Based on: 8 2 8.5%/2 Cash Flow Table Value Amount Present Value 6 Future B6 C6 vahue PV(B4,B3,0,-1,0) PV(B4,B3.-1,0,0) 770000 7 Interest (annuity) 8 Issue price of bonds -D6+D7 10 Date Jan. 1 Account Titles and Explanation Debit Credit DS D13-C11 12 13 Discount on bonds Bonds -C6 o record issuance of bonds) 15 16 2 17 18 19 20 21 Date Account Titles and Explanation Debit Credit June. 30 Interest -D8 B4 -C18-D20 Discount on bonds Cash o record interest payment 23 3 PARK CORPORATION Balance Sheet (Partial) At June 30 24 25 26 Bonds payable 27 Less: Discount on bonds payable 28 term liabilties: -C6 -C12-D19 -C26-C27