Question

LOMPANY NEEDS TO RAISE MONEY FOR A FUTURE VENTURE AN 1/1/2018 ONE INVESTOR ISSUES A BOND FOR $100,000 N-3 1-10% MKT = 10% PV OF 15.75 PV OF ORDINARY ANNUITY - 2.5 ON 1/1/2018 ONE INVESTOR ISSUES A BOND FOR $100,000 N=3 -15% MKT -10% ON 1/1/2018 ONE INVESTOR ISSUES A BOND FOR $100,000 N=3 1=7% MKT = 10% ON 1/1/2018 10000 SHARES ARE ISSUED $10 PAR FOR $100,000 NO OTHER ACTIVITY OCCURS IN 2018 EXCEPT ENTRIES REQUIRED AS A RESULT OF THE BOND ISSUES. PREPARE A TRIAL BALANCE @ 12/31/2018 VW PROBLEM ANNUITY DUE) A17

Answer 1

net proceeds from bond issue -1 = (annual interest*PV of ordinary annuity)+(principal*PV of 1)	(10000*2.5)+(100000*.75)	100000
net proceeds from bond issue -2	(15000*2.5)+(100000*.75)	112500
premium on bonds	112500-100000	12500
net proceeds from bond issue -3	(7000*2.5)+(100000*.75)	92500
discount on bond issue	100000-92500	7500
Journal entries
date	explanation	debit	credit
1/1//2018	cash	100000
	bonds payable		100000
1/1//2018	cash	112500
	bonds payable		100000
	premium on bonds payable		12500
1/1//2018	cash	92500
	discount on bonds payable	7500
	bonds payable		100000
1/1//2018	cash	100000
	common stock		100000
	Trial balance
explanation	debit	credit
bonds payable		300000
premium on bonds payable		12500
discount on bonds payable	7500
common stock		100000
cash	405000
total	412500	412500