Question

2 t on 2) On January 2, Andrew Corp, issued 1.000, $1,000 bonds to finance a year. When issued, investors 31, Year 5 Required 1. Compute the selling price of the bonds 2. Prepare the entry to record the sale of the bonds. 1. Selling price is $ Account Date 3. Journal En Date 31 Account Credit Date 31 Account Debit

Answer 1

Solution 1:

Computation of bond price
Table values are based on:
n=	5
i=	5.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.78353	$1,000,000.00	$783,526
Interest (Annuity)	4.32948	$60,000.00	$259,769
Price of bonds			$1,043,295

Solution 2:

Journal Entries - Andrew Corp.
Date	Particulars	Debit	Credit
2-Jan	Cash Dr	$1,043,295.00
	To Bond Payable		$1,000,000.00
	To Premium on Bond Payable		$43,295.00
	(To record issue of bond at premium)

Solution 3:

Journal Entries - Andrew Corp.
Date	Particulars	Debit	Credit
31-Dec	Interest Expense Dr ($1,043,295*5%)	$52,165.00
	Premium on bond payable Dr	$7,835.00
	To Cash		$60,000.00
	(To record interest payment and premium amortization)
31-Dec	Bond Payable Dr	$1,000,000.00
	To Cash		$1,000,000.00
	(To record bond repayment)