Face Value $500,000 Coupon Rate 5.0% Market Rate 4.0% Semiannual Interest Payments Due June 30 and...
|
Face Value |
$500,000 |
|
Coupon Rate |
5.0% |
|
Market Rate |
4.0% |
|
Semiannual Interest Payments |
Due June 30 and Dec 31 |
|
Maturity Date |
5 years |
|
Issue Date |
Jan.1 |
|
Based on the data above, complete the journal entries for:
|
|
|
Date |
General Journal |
Debit |
Credit |
|
1/1 |
|||
|
6/30 |
|||
|
12/31 |
|||
|
Face Value |
$200,000 |
|
Coupon Rate |
6.5% |
|
Market Rate |
7.5% |
|
Semiannual Interest Payments |
Due June 30 and Dec 31 |
|
Maturity Date |
5 years |
|
Issue Date |
Jan.1 |
|
Based on the data above, complete the journal entries for:
|
|
|
Date |
General Journal |
Debit |
Credit |
|
1/1 |
|||
|
6/30 |
|||
|
12/31 |
|||
Homework Answers
1)semiannual interest =Par value *coupon rate *n/12 [2semiannual periods in a year comprising of 6 months each]
= 500000*.05*6/12
= 12500
semiannual market interest rate = 4*6/12 = 2%
semiannual periods = 5*2 = 10
Present value of Bond =[PVA2%,10*semiannual interest ]+[PVF2%,10*par value]
=8.98259*12500] +[.82035*500000]
= 112282.38+ 410175
= 522457.38 [rounded to 522457]
| Date | Account title | Debit | credit |
| 1Jan | cash | 522457 | |
| Premium on bond payable | 22457 | ||
| Bond payable | 500000 | ||
| 30June | Interest expense (522457*2%) | 10449.14 | |
| Premium on bond payable | 2050.86 | ||
| cash | 12500 | ||
| 31Dec | Interest expense (520406.14*2%) | 10408.12 | |
| Premium on bond payable | 2091.88 | ||
| cash | 12500 |
carrying value of Bond on 30June =Issue price +premium amortized on 30June
= 522457-2050.86
= 520406.14
2)
semiannual interest =Par value *coupon rate *n/12 [2semiannual periods in a year comprising of 6 months each]
= 200000*.065*6/12
= 6500
semiannual market interest rate = 7.5*6/12 = 3.75%
semiannual periods = 5*2 = 10
Present value of Bond =[PVA3.75%,10*semiannual interest ]+[PVF3.75%,10*par value]
=[8.21279*6500] +[.69202*200000]
=53383.14+ 138404
= 191787.14 [rounded to 191787]
| Date | Account title | Debit | credit |
| 1Jan | cash | 191787 | |
| Discount on bond payable | 8213 | ||
| Bond payable | 200000 | ||
| 30June | Interest expense (191787*.0375) | 7192.01 | |
| Discount on bond payable | 692.01 | ||
| cash | 6500 | ||
| 31Dec | Interest expense (192479.01*.0375) | 7217.96 | |
| Discount on bond payable | 717.96 | ||
| cash | 6500 |
carrying value of Bond on 30June =Issue price +premium amortized on 30June
= 191787 + 692.01
= 192479.01
**Find present value annuity factor and present value table from their table respectively at i% for n periods or using financial calculator .
Add Answer to:
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Required:
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