Question

Check my work Viewp Park Corporation is planning to issue bonds with a face value of $640,000 and a coupon rate of 7.5 percent. The bonds mature in 6 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 51. 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: 1.82. Prepare the journal entries to record the issuance of the bonds and Interest payment on June 30 of this year 3. What bonds payable amount will Park report on its June 30 balance sheet?

Answer 1

Prepare the journal entry to record the issuance of the bonds as shown below: Ref. Credit Date January 01 JOURNAL Account Titles and Explanation Cash Note-1] Discount on bonds payable ($640.000 - $610.426] Bonds payable (To record the issue of bonds on discount) Debit $610.426 $29.574| $640.000 Note-1: Determine the cash received on issue of bonds payable (present value of bonds) as shown below: Present value Present Details Amount X factor@ 4.25% = value [8.50% + 2] Bonds face value $ 640,000 0.6069* = $ 388.416 Interest on bonds ($640.000 x 7.50% x 6/12) $ 24.000 9.2504** = $ 222.010 Total issue price of the bonds IS 610.426 * Present value factor @ 4.25% at 12th semi-annual period ** Cumulative Present value factor @ 4.25% for 12 semi-annual periods

Note-2: Determine the present value and cumulative present value factor as shown below: ДА Year 12 3 65 7 6 8 7 98 10 9 11 10 11 12 14 Total BBCOVOU AWNA Present value @ 4.25% 0.9592 0.9201 0.8826 0.8466 0.8121 0.7790 0.7473 0.7168 0.6876 0.6595 0.6326 0.6069 9.2504

Year Present value @ 4.25% 21 3 2 4 3 65 76 8 7 9 8 10 9 11 10 12 11 13 12 14 Total =1/(1.0425) A2 1=1/(1.0425) A3 =1/(1.0425) A4 =1/(1.0425) A5 =1/(1.0425) A6 1=1/(1.0425) A7 =1/(1.0425) A8 =1/(1.0425) A9 =1/(1.0425) A10 =1/(1.0425) A11 =1/(1.0425) A12 =1/(1.0425)^A13 =SUM(B2:B13) 2. Prepare a journal entry to record the interest payment on June 30 as shown below: Credit Date June 30 Ref. Debit $25.943 JOURNAL Account Titles and Explanation Interest expense ($610.426 x 8.50% < (612) months) Cash ($640.000 x 7.50% x (6 - 12) months) Discount on bonds payable ($25,943 - $24.000] (To record the interest on bonds payable) $24.000 $1.943

Determine the bonds payable amount to be presented in the June 30 balance sheet as shown below: Balance Sheet (Partial) At June 30 Long-term Liabilities: Bonds Payable Less: Discount on bonds payable ($29,574 - $1,943] $640,000 $27.631 $612,3691