2. |
Prepare the journal entry to record their issuance by Patey on January 1, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.) |
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4. |
Prepare the journal entry to record interest on June 30, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.) |
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req 1. | ||||||
Price of bonds | ||||||
n = 8 | ||||||
I = 5.50% | ||||||
Cashflow | Amount | Present value | ||||
Interest (720000*10% *6/12) | 36000 | 228044.2 | (36000*6.33456) | |||
Principal | 720000 | 469151.3 | (720000*0.651599) | |||
price of bonds | 697195.4 | |||||
Req 2. | ||||||
Cash account | 697195 | |||||
Discount on bonds payable | 22805 | |||||
Bonds payable | 720,000 | |||||
Rreq 3. | ||||||
Amort chart | ||||||
Period | Cash Int | Int exp | Discount | Carrying value | ||
Amortized | ||||||
01.01.13 | 697195 | |||||
30.06.13 | 36000 | 38,346 | 2,346 | 699,541 | ||
31.12.13 | 36000 | 38,475 | 2,475 | 702,015 | ||
30.06.14 | 36000 | 38,611 | 2,611 | 704,626 | ||
31.12.14 | 36000 | 38,754 | 2,754 | 707,381 | ||
30.06.15 | 36000 | 38,906 | 2,906 | 710,287 | ||
31.12.15 | 36000 | 39,066 | 3,066 | 713,352 | ||
30.06.16 | 36000 | 39,234 | 3,234 | 716,587 | ||
31.12.16 | 36000 | 39,413 | 3,413 | 720,000 | ||
Rreq 4. | ||||||
30.06.13 | Interest expenses | 38346 | ||||
Cash account | 36000 | |||||
Discount on bonds payable | 2346 | |||||
Req 5. | ||||||
Bonds payable (net) | ||||||
Bonds payable-Gross | 720000 | |||||
less: unamortized discount on bonds | 17984 | |||||
(22805-2346-2475) | ||||||
Net Bonds payable | 702016 | |||||
Req 6. | ||||||
Interest expenses for 2013 | ||||||
Interest expense on 30.06.13 | 38346 | |||||
Interest expenses on 31.12.13 | 38475 | |||||
Total Interest expense for 2013 | 76821 | |||||
Req 7. | ||||||
31.12.16 | Bonds payable | 720000 | ||||
Cash account | 720000 | |||||
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