Question

The Bradford Company issued 10% bonds, dated January 1, with a face amount of $94 million on January 1, 2018. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2018. 2. to 4. Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2018 (at the effective rate). Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Determine the price of the bonds at January 1, 2018. (Enter your answers whole dollars.) Table values are based on: n= Amount Present Value Cash Flow Interest Principal D.-IL-

Answer 1

Table values are based on:
n=	20
i=	5.0%
Cash Flow	Amount	Present Value	Present Value factor(6%,20)
Interest	$94,000,000*5% =$4,700,000	$5,39,08,624	11.46992
Principal	$94,000,000	$2,93,09,200	0.3118
Price of Bonds		$8,32,17,824
Amortization table
Date	Interest Payment($94,000,000*5.00%)	Interest expenses(Bond carrying amount*6%)	Discount amorrtization	Bond carrying amount
01-Jan-18				8,32,17,824
30-Jun-18	47,00,000	49,93,069	2,93,069	8,35,10,893
31-Dec-18	47,00,000	50,10,654	3,10,654	8,38,21,547
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	8,32,17,824
		Discount on Bonds Payable	1,07,82,176
		Bonds Payable		9,40,00,000
	30-Jun-18	Interest Expenses	49,93,069
		Discounts on Bond payable		2,93,069
		Cash		47,00,000
	31-Dec-18	Interest Expenses	50,10,654
		Discounts on Bond payable		3,10,654
		Cash		47,00,000