Question

Problem 10-1AA Computing bond price and recording issuance LO C2, P1 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. (Table B1, Table 8.2. Table 8.3, and Table 8.4) (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. Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Required 3A Required 3B Complete the below table to determine the bonds' issue price on January 1, 2017, If the market rate at the date of issuance is 10%.

Answer 1

B2 X foc la AB C D E F G H n= 20 5.0% i= cash flow table value amount par (maturity) value interest (annuity) price of bonds 0.3769 12.4622 $ 22,000 $1,320 present value $8,292 $ 16,450 $ 24,742 date account titles and explanation debit credit 01 January 2017 $ 24,742 bonds payable premium on bonds payable (to record bond issue) $ 22,000 $ 2,742

B17 1 x fx za ✓ C A B E F G H I 2a n= | | 20 6.0% cash flow table value amount par (maturity) value interest (annuity) price of bonds 0.3118 11.4699 $ 22,000 $ 1,320 present value $6,860 $ 15,140 $ 22,000 date account titles and explanation debit credit 01 January 2017 $ 22,000 cash bonds payable (to record bond issue) $ 22,000

B31 x for 3a C D E F G H 30 3a | n= i= 20 7.0% cash flow table value amount par (maturity) value interest (annuity) price of bonds 0.2584 10.5940 $ 22,000 $ 1,320 present value $5,685 $ 13,984 $ 19,669 date account titles and explanation | debit credit 01 January 2017 $ 19,669 $ 2,331 cash discount on bonds payable bonds payable (to record bond issue) $ 22,000

for formulas and calculations, refer to the image below -

X for la D E F G H I la n = i= =10*2 =10%/2 cash flow table value amount present value par (maturity) value =ROUND(-PV(D3,D2,0,1),4) interest (annuity) =ROUND(-PV(D3,D2,1),4) price of bonds = 22000 |=E5*12%/2 =D5*E5 =D6*E6 =SUM(F5:F6) date account titles and explanation debit credit 42736 cash bonds payable premium on bonds payable (to record bond issue) =E5 =G11-H12

B17 | x ✓ fox za A B C D E F G H I 2an i = = =10*2 =12%/2 cash flow table value amount present value par (maturity) value =ROUND(-PV(D18,D17,0,1),4) =22000 =D20*E20 interest (annuity) =ROUND-PV(D18,017,1),4) =E20*12%/2 =D21*E21 price of bonds =SUM(F20:F21) 25 date account titles and explanation debit credit 42736 =F22 cash bonds payable (to record bond issue) =E20

B31 X for 3a G H 3an = i= =10*2 =14%/2 cash flow table value amount present value par (maturity) value =ROUND(-PV(D32,D31,0,1),4) =22000 =D34*E34 interest (annuity) =ROUND(-PV(D32,D31,1),4) =E34*12%/2 =D35*E35 price of bonds =SUM(F34:F35) 3b date account titles and explanation debit credit 42736 =F36 =H42-G40 cash discount on bonds payable bonds payable (to record bond issue) =E34

In case you have any query, kindly ask in comments.