Question

Ch 10 Ex 10-3A Exercise 10-3A Computing bond interest and price; recording bond issuance LO C2 (Use appropriate factorisl from the tabies previded 2. How 3. Use the are issued at par at a discount, or at a premium. 5. Prepare the journal entry to record the bonds' issuance. Req 1 to 3 Req 4 what is rates given to select whether the bonds are issued at

Answer 1

Solution 1 to 3:

Par (Maturity) Value	*	Semiannual Rate (8%/2 = 4%)	=	Semiannual Cash Interest Payment
$5,70,000	*	4%	=	$22,800
Number of Payments (9 years *2)				18
Whether bonds issued at par, at a discounts or at a premium?				At a discount (Because coupon rate is less than Market rate)

Solution 4:

Chart Values are based on:
n= (9 Years*2)	18	Half years
i= (10%/2)	5%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Par (Maturity) Value	0.4155	*	$5,70,000	=	$2,36,835
Interest (Annuity) [$570,000*8%*6/12]	11.6896	*	$22,800	=	$2,66,523
Price of Bonds					$5,03,358

Solution 5:

Transaction	General Journal	Debit	Credit
1	Cash Dr	$5,03,358
	Discount on Bond Payable	$66,642
	To Bond Payable		$5,70,000
	(To record issue of bonds)