Question

Why is Req 5 wrong?

Homework Help Save You received partial credit in the previous attempt Check my work View pre Exercise 10-3A Computing bond interest and price; recording bond issuance LO C2 Bringham Company issues bonds with a par value of $690,000 on their stated the date. The bonds mature in 7 years and pay 7% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 10% (Table B.1. Table B.2. Table B 3. and Table 3.4) (Use appropriate factor(s) from the tables provided.) 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. Complete this question by entering your answers in the tabs below. Reg 1 to 3 Reg 4 Reg 5 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 given to select whether the bonds are issued at par, at a discount, or at a premium. Prev 1 of 5 !! Next >

Answer 1

Part-1
Par(maturity value)		Semiannual		Semi annual cash
		rate		interest payment
$690,000.00	X	3.50%	=	$24,150.00

Part-2: Number of payments= 7 year/ 2 = 14

Part-3: At a discount because stated rate is 7% which is less than rate prevailing in Market

Part-4
table values are based on:
n=	14
i=	5.00%
Cash flow	table value		amount	PV
Par(Maturity Value )	0.5051	X	$690,000	$348,519
interest	9.895	X	$24,150	$238,964
price bonds				$587,483

journal entry
Account Tittle	Debit	Credit
cash	$587,483
discount on bonds payable	$52,022
bonds payable		$690,000