Question

Tano issues bonds with a par value of $98,000 on January 1, 2015, The bonds' annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $90,537

Answer 1

(1) Total Discount = $98,000 - $90,537 = $7,463

The journal entries for all the periods are shown below

(2) 6 payments of $3,430 each = $20,580

Add:- Par value paid at maturity = $98,000

Total Repaid = $118,580

less:- amount boorowed = $90,537

Total bond interest expense = $28,042

(3)

Particulars Janua Februa March April $ 29,506.00 6,470.52 4,130.84 S 33,613.10 $ 37,976.74 $ 39,747.48 $ 25,375.16 $ 19,495.60 $ 22,026.51$ 23,053.54 3,361.31$ 3,797.67 $ 10,756.19 31,858.34 41,738.24 S 39,085.00 44,159.00 $ 46,218.00 Forecasted Sales Cash Sales (1496)-A Credit Sales 58% collected after 1-month-B 10% collected after 2-months-C 32% collected after 3-months-D Total Cash Collections - (A+B+C+D) $ 5,471.90

Also attaching all relevant journal entries for your reference

Credit (In $) Date 1/1/2015 Cash Particulars Debit (In $) 90,537.00 7,463.00 Discount on bonds pavable Bonds Payable $ 98,000.00 6/30/2015 Interest Expense (98000*796*6/12 4,673.83 Discount on bonds payable (7463/6 Cash 1,243.83 $ 3,430.00 12/31/2015 Interest Expense 4,673.83 Discount on bonds pavable Cash 1,243.83 $ 3,430.00 6/30/2016 Interest Expense 4,673.83 Discount on bonds pavable Cash 1,243.83 $ 3,430.00 12/31/2016 Interest Expense 4,673.83 Discount on bonds pavable Cash 1,243.83 $ 3,430.00 6/30/2017 Interest Expense 4,673.83 Discount on bonds pavable Cash 1,243.83 $ 3,430.00 12/31/2017 Interest Expense 4,673.83 98,000 Bonds Payable Discount on bonds pavable Cash 1,243.83 $101,430.00