Question

Exercise 10-8A Computing bond interest and price; recording bond issuance LO C2, P3 3 points Citywide Company issues bonds with a par value of $76,000 on their stated issue date. The bonds mature in ten years and pay 9% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 8%. (Table B1, Table B.2. Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) eBook 1. What is the amount of each semiannual interest payment for these bonds? 2. How many semiannual interest payments will be made on these bonds over their life? 3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. 4. Compute the price of the bonds as of their issue date. 5. Prepare the journal entry to record the bonds' issuance. Hint Complete this question by entering your answers in the tabs below. Print Req 1 to 3 Req 4 Req 5 References What is the amount of each semiannual interest payment for these bonds? How many semiannual interest payments will be made on these bonds over their life? Use the Interest rates glven to select whether the bonds are issued at par, at a discount, or at a premium. Par (maturity) value Semiannual Rate Semiannual cash interest payment Number of payments yments Whether the bonds are issued at par, at a discount, or at a premium? < Red 1 to 3 Reg 4 >

Answer 1

Solution 1 to 3:

Par (Maturity) Value	*	Semiannual Rate (9%/2 = 4.50%)	=	Semiannual Cash Interest Payment
$76,000	*	4.50%	=	$3,420
Number of Payments (10 years *2)				20
Whether bonds issued at par, at a discounts or at a premium?				At a premium (Because coupon rate is more than Market rate)

Solution 4:

Chart Values are based on:
n= (10 Years*2)	20	Half years
i= (8%/2)	4%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Par (Maturity) Value	0.4564	*	$76,000	=	$34,686
Interest (Annuity) [$76,000*9%*6/12]	13.5903	*	$3,420	=	$46,479
Price of Bonds					$81,165

Solution 5:

Transaction	General Journal	Debit	Credit
1	Cash Dr	$81,165
	To Premium on Bond payable		$5,165
	To Bond Payable		$76,000
	(To record issue of bonds)