Question

The Bradford Company issued 12% bonds, dated January 1, with a face amount of $86 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2021. 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate). Complete this question by entering your answers in the tabs below. Reg 1 Req 2 to 4 Determine the price of the bonds at January 1, 2021. (Enter your answers whole dollars.) 7 00 Table values are based on: 20 7.0% Cash Flow Amount Interest $ 0 Principal $ 86,000,000 Price of bonds Present Value 22,224,034

Answer 1

1)	Computation Of Bond Price
	a	Semi-annual Interest Amount	$             51,60,000
		($86000000*12%/2)
	b	PV Annuity Factor for (20 Years,7%)	10.5940
	c	Present Value Of Annual Interest (a*b)	$         5,46,65,114
	d	Redemption Value	$         8,60,00,000
	e	PV Factor Of (20 Years,7%)	0.25842
	g	Present Value Of Redemption Amount (d*e)	$         2,22,24,034
	f	Intrinsic Value ( Price ) Of The Bond (c+g)	$         7,68,89,148
	In your format
		Table values are based on:
		n =	20
		i =	7.0%
		Cash Flow	Amount	Present Value
		Interest	$             51,60,000	$         5,46,65,114
		Principal	$         8,60,00,000	$         2,22,24,034
		Price of bonds		$         7,68,89,148
	Date	Account Title	Debit	Credit
	Jan-21	Cash	$         7,68,89,148
		Discount On Bond	$             91,10,852
		Bond Payable		$         8,60,00,000
		( to record issuance of bond)
	Jun-30	Interest expenses	$             53,82,240
		Discount On Bond payable		$               2,22,240
		Cash		$             51,60,000
	Dec-31	Interest expenses	$             53,97,797
		Discount On Bond payable		$               2,37,797
		Cash		$             51,60,000
		( to record interest payment)
	Let me know the wrong, if any. Please upvote.