Question

I need help with ALL 4 requirements. DO NOT ANSWER if you dont know it. I do rate, so dont waste your time or mine.

On February 1. 2018. Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $55 million. The bond mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $55,000 of the bonds as a long-term investment. The fiscal years of both firms end 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 issued on February 1, 2018 2-a. Prepare amortization schedules that indicate Cromley's effective interest expense for each interest period during the term to maturity. 2-b. Prepare amortization schedules that indicate Barnwell's effective interest revenue for each interest period during the term to maturity 3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell's investment on February 1, 2018 4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020 Complete this question by entering your answers in the tabs below Req1 Reg 2A Reg 2B Reg 3 Req 4 Cromley Barnwell Determine the price of the bonds issued on February 1, 2018. (Enter your answer in whole dollars.) Price of the bonds Req 2A >

Answer 1

Required 1 :

Price of the bonds = $ 51,296,971. { $ 11,109,021+$40,187,950}
Explanation :
Cromley: Cash interest paid = 6% * $55,000,000*6/12 = $ 1,650,000
Present value of interest (annuity) Table 4 , N= 8 periods ,rate 4 %
8 payments @ 4 % = 6.73274 * $ 1,650,000 = $ 11,109,021
Prsent value of $ 55 Million , Table 2 N= 8 periods , rate = 4 %.
8 payments @ 4 % = 0.73069* $ 55,000,000 = $ 40,187,950
Price of the bonds = $ 51,296,971. { $ 11,109,021+$40,187,950}
Barnwell purchased $55,000 / $ 55,000,000 = 0.1 % of bonds
Therefore the price paid = 0.1% * $51,296,971 = $ 51,297 (rounded )

Required 2 A :
Payment	Cash payment	Effective Interest	Increase in balance	Outstanding balance
Number
				$ 51,296,971
1	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,051,879 {$51,296,971*4%}	$ 401,879 {2,051,879-1,650,000}	$ 51,698,850 {51,296,971+401,879}
2	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,067,954	$ 417,954	$ 52,116,804
3	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,084,672	$ 434,672	$ 52,551,476
4	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,102,059	$ 452,059	$ 53,003,535
5	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,120,141	$ 470,141	$ 53,473,676
6	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,138,947	$ 488,947	$ 53,962,623
7	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,158,505	$ 508,505	$ 54,471,128
8	$ 1,650,000 {6%*$55 Million * 6/12}	$ 2,178,872	$ 528,872 {55,000,000-54,471,128}	$ 55,000,000
Totals	$ 13,200,000	$ 16,903,029	$ 3,703,029

Required 2 B :
Payment	Cash payment	Effective Interest	Increase in balance	Outstanding balance
Number
				$ 51,297
1	$ 1,650 {6%*$55,000 * 6/12}	$ 2,052 {$51,297 *4%}	$ 402 {$2,052-$1,650}	$ 51,699 {$51,297+$ 402 }
2	$ 1,650 {6%*$55,000 * 6/12}	$ 2,068 {$51,699 *4 %}	$ 418   {$2,068- $1,650}	$ 52,117 {$51,699+$ 418 }
3	$ 1,650 {6%*$55,000 * 6/12}	$ 2,085	$ 435	$ 52,552
4	$ 1,650 {6%*$55,000 * 6/12}	$ 2,102	$ 452	$ 53,004
5	$ 1,650 {6%*$55,000 * 6/12}	$ 2,120	$ 470	$ 53,474
6	$ 1,650 {6%*$55,000 * 6/12}	$ 2,139	$ 489	$ 53,963
7	$ 1,650 {6%*$55,000 * 6/12}	$ 2,159	$ 509	$ 54,472
8	$ 1,650 {6%*$55,000 * 6/12}	$ 2,178 {$1,650+$528}	$ 528 {$ 55,000 -$ 54,472}	$ 55,000
Totals	$ 13,200	$ 16,903	$ 3,703

Required 3 :
Date	General Journal	Debit	Credit
Cromley :
Feb 1,2018	Cash	$ 51,296,971
	Discount on bond payable	$ 3,703,029
	Bonds payable		$ 55,000,000
	( To record issuance of bonds by Cromley )
Barwell :
Feb 1,2018	Investment in bonds	$ 55,000
	Discount on bond investment		$ 3,703
	Cash		$ 51,297
	(To record Barnwell's investment on Feb 1 2018 )

Required 4 :
Date	General Journal	Debit	Credit
Cromley :
31-Jul-18	Interest expense {$51,296,971*4%}	$ 2,051,879
	Discount on bond payable {2,051,879-1,650,000}	$ 401,879
	Cash {6%*$55 Million * 6/12}		$ 1,650,000
	( To record interest expenses for 6 months )
31-Dec-18	Interest expense ($ 2,067,954 *5/6 months)	$ 1,723,295
	Discount on bond payable ($ 417,954 * 5/6 months)	$ 348,295
	Interest payable ($1,650,000*5/6 months)		$ 1,375,000
	( To record interest expenses for 5 months )
31-Jan-18	Interest expense ($2,067,954 *1/6 months )	$ 344,659
	Interest payable {(1650,000+69,659 )-($344659)}	$ 1,375,000
	Discount on bond payable ($ 417,954 *1/6 months )		$ 69,659
	Cash		$ 1,650,000
	( To record interest expenses for 1 month )
31-Jul-19	Interest expense (52,116,804*4%}	$ 2,084,672
	Discount on bond payable {2,084,672 -1650,000}	$ 434,672
	Cash {6%*$55 Million * 6/12}		$ 1,650,000
	( To record interest expenses for 6 months )
31-Dec-19	Interest expense {2,102,059 *5/6 months }	$ 1,751,716
	Discount on bond payable {$ 452,059 *5/6 months }	$ 376,716
	Interest payable ($1,650,000*5/6 months)		$ 1,375,000
	( To record interest expenses for 5 months )
31-Jan-20	Interest expense {2,102,059*1/6 Months }	$ 350,343
	Interest payable {( 75,343+1650,000 )-$ 350,343 }	$ 1,375,000
	Discount on bond payable {452,059*1/6 months )		$ 75,343
	Cash		$ 1,650,000
	( To record interest expenses for 1 month )

Required 4 :
Date	General Journal	Debit	Credit
Barnwell :
31-Jul-18	Cash {6%*$55,000 * 6/12}	$ 1,650
	Discount on bond investment {$2,052-$1,650}	$ 402
	Interest Revenue {$51,297 *4%}		$ 2,052
	( To record interest revenue for 6 months )
31-Dec-18	Interest Receivable {$1,650 *5/6 months }	$ 1,375
	Discount on Bond investment ($ 418 *5/6 months }	$ 348
	Interest Revenue ($ 2,068*5/6 months }		$ 1,723
	( To record interest revenue for 5 months )
31-Jan-18	Cash	$ 1,650
	Discount on bond investment($ 418*1/6 months )	$ 70
	Interest Receivable {(1650+70)-(345 )}		$ 1,375
	Interest Revenue ($ 2,068 *1/6 months )		$ 345
	( To record interest revenue for 1 month )
31-Jul-19	Cash {6%*$55,000 * 6/12}	$ 1,650
	Discount on bond investment {$ 2,085 -$ 1,650 }	$ 435
	Interest Revenue {$ 52,117 *4 % }		$ 2,085
	( To record interest revenue for 6 months )
31-Dec-19	Interest Receivable ($ 1,650 *5/6 months )	$ 1,375
	Discount on Bond investment ( $ 452 *5/6 months )	$ 377
	Interest Revenue ( $ 2,102 * 5/6 months )		$ 1,752
	( To record interest revenue for 5 months )
31-Jan-20	Cash	$ 1,650
	Discount on bond investment ($ 452 *1/6 months )	$ 75
	Interest Receivable {($ 1650+75 )-$350 }		$ 1,375
	Interest Revenue ( $ 2,102 *1/6 months )		$ 350
	( To record interest revenue for 1 month )