Question

Brief Exercise 10-17 On January 1, 2018, Carvel Corp. issued five-year bonds with a face value of $640,000 and a coupon interest rate of 6%, with interest payable semi-annually. Assume that the company has a December 31 year end and records adjusting entries annually. Your answer is partially correct. Try again. Record the journal entries relating to the bonds on January 1, July 1, and December 31, assuming that when the bonds were sold, the market interest rate was 5%. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Cash 640000 Bonds Payable 640000 July 1 Bonds Payable Interest Expense Dec. 31

Answer 1

Part 1
Table values are based on:
n=	10
i=	2.5%
Cash Flow	Table Value	Amount	Present Value
Interest	8.75206	$19,200	$1,68,040
Principal	0.7812	$6,40,000	$4,99,968
Price of Bonds			$6,68,008
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$6,68,008
		Bonds Payable		$6,68,008
	01-Jul-18	Bonds Payable	$2,800
		Interest expenses	$16,400
		Cash		19200
	31-Dec-18	Bonds Payable	$2,800
		Interest expenses	$16,400
		Cash		19200
Part 2
Table values are based on:
n=	10
i=	3.0%
Cash Flow	Table Value	Amount	Present Value
Interest	8.5302	$19,200	$1,63,780
Principal	0.74409	$6,40,000	$4,76,220
Price of Bonds			$6,40,000
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$6,40,000
		Bonds Payable		$37,000
	01-Jul-18	Interest expenses	$19,200
		Cash		$19,200
	31-Dec-18	Interest expenses	$19,200
		Cash
				$19,200
Part 3
Table values are based on:
n=	10
i=	3.5%
Cash Flow	Table Value	Amount	Present Value
Interest	8.3166	$19,200	$1,59,679
Principal	0.70892	$6,40,000	$4,53,709
Price of Bonds			$6,13,388
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-18	Cash	$6,13,388
		Bonds Payable		$6,13,388
	01-Jul-18	Interest expenses	$21,860
		Cash		$19,200
		Bond Payable		$2,660
	31-Dec-18	Interest expenses	$21,860
		Cash		$19,200
		Bond Payable		$2,660