Question

On January 1, 2018, Mania Enterprises issued 10% bonds dated January 1, 2018, with a face amount of $19.1 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 8%. 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. Enter your answers in whole dollars.) Required: 1. Determine the price of the bonds at January 1, 2018. 2. Prepare the journal entry to record the bond issuance by Mania on January 1, 2018. 3. Prepare the journal entry to record interest on June 30, 2018, using the effective interest method. 4. Prepare the journal entry to record interest on December 31, 2018, using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the price of the bonds at January 1, 2018. Bond value Required 1 Required 2 >

Answer 1

Table values are based on:
n=	20
i=	4.0%
Cash Flow	Table Value	Amount	Present Value
Interest	13.59033	$9,55,000	$1,29,78,765
Principal	0.45639	$1,91,00,000	$87,17,049
Price of Bonds			$2,16,95,814
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$2,16,95,814
		Bonds Payable		$1,91,00,000
		Premium on Bond payable		$25,95,814
	30-Jun-18	Interest expenses	$8,67,833
		Premium on Bond payable	$87,167
		Cash		$9,55,000
	31-Dec-18	Interest expenses	$8,64,346
		Premium on Bond payable	$90,654
		Cash		$9,55,000
Table values are based on:
n=	20
i=	5.0%
Cash Flow	Table Value	Amount	Present Value
Interest	12.46221	$8,20,000	$1,02,19,012
Principal	0.37689	$2,05,00,000	$77,26,245
Price of Bonds			$1,79,45,257
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$1,79,45,257
		Discount on Bonds Payable	$25,54,743
		Bonds Payable		$2,05,00,000
	30-Jun-18	Interest expenses	$8,97,263
		Cash		$8,20,000
		Discount on Bonds payable		$77,263
	31-Dec-18	Interest expenses	$9,01,126
		Cash		$8,20,000
		Discount on Bonds payable		$81,126