Question

Exercise 14-16A Computing bond interest and price; recording bond issuance LO C2 Bringham Company issues bonds with a par value of $800,000. The bonds mature in 10 years and pay 6% annual interest in semiannual payments. The annual market rate for the bonds is 8%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. Compute the price of the bonds as of their issue date. 2. Prepare the journal entry to record the bonds' issuance Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the price of the bonds as of their issue date. (Round all table values to 4 decimal places, and use the rounded table values in calculations. Round intermediate calculations to the nearest dollar amount.) Table Values are Based on: Table Value Amount Present Value Cash Flow Par (maturity) value Interest (annuity) Price of bonds

Answer 1

Answer:

Price of the Bond as on the Issue date
Table values are based on:
n	20 Years
i	4%
Sl No. 01
Cash Flow	Table Value		Amount		Present Value
Par Value	0.4936	*	8,00,000	=	3,94,880
Interest	13.5903	*	24,000	=	3,26,167
					7,21,047
The value are taken from the 'Present Value' table and 'Annuity' table
with respect of 6% p.a. interest, semiannually paid i.e., number of
period is 6*2= 12
Interest=800,000*6%/2 = $24,000

	Accounts titles and Explanation	Debit ($)	Credit ($)
Sl No. 02	Cash	7,21,047
	Discount on payable	78,953
	Bonds payable		8,00,000
	( to record issuance of the bonds for cash)