INTERMEDIATE ACCOUNTING 11 HANDOUT PROBLEM 2 Score Name Section Problem (10 poin

Question

INTERMEDIATE ACCOUNTING 11 HANDOUT PROBLEM 2 Score Name Section Problem (10 points). Tirana Corporation sold two sets of bond issues on July 1,20X4 when the prevailing market interest rate for similar bonds was 6%. Information concerning these bond issues is provided below. TIRANA CORPORATION INFORMATION ABOUT BOND ISSUES MADE ON JULY 1, 20X4 (1) Bond Issue A consists of 5,000 bonds, each with a face amount of $1,000. The bonds are dated July 1, 20X4 and pay 7% interest per year in annual installments on July 1 of each year. The bonds will mature ten years from the date of issuance. (2) Bond Issue B consists of 3,000 bonds, each with a face amount of $1,000. The bonds are dated July 1, 20X4 and pay 5.5% interest per year insemannual installments on January 1 and July 1 of each year. The bonds will mature twelve years from the date of issuance. REQUIRED:(1) (2) (3) Calculate the issue price for each of the bond issues. Show supporting calculations. Round your calculations to the nearest whole dollar. Prepare amortization schedules for each of the bond issues through July 1, 20X6. Round all calculations to the nearest whole dollar. Prepare all general journal entries, in proper form, to record the transactions related to these bond issues from July 1,20X4 through December 31, 20X5. Provide the appropriate date and a brief explanation for each entry made.

Explanation / Answer

Soluton: (Bond A)

No. of Bonds= 5000

Face value =$1000

Period =10 year

Rate =7% Present value factor is for 10Year is 0.5083

Issue Price of bonds = $1000*0.5083

= $ 508.30

Total Value =5000*$508.30

=$2541500

Bond(B)

No. of Bonds= 3000

Face value= $1000

Coupan Rate= 5.5% annualy and 5.5/2=2.75% Semi annualy

present Value Factor For 24 Year Semiannualy is for 2.75 is 0.521

issue price=1000*.521=521

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