On January 1, 2018, NFB Visual Aids issued $900,000 of its 20-year, 10% bonds. T
ID: 2336718 • Letter: O
Question
On January 1, 2018, NFB Visual Aids issued $900,000 of its 20-year, 10% bonds. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $768,000 as determined by their market value in the over-the-counter market. General (risk-free) interest rates did not change during 2021. (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.)Required1-a. Determine the price of the bonds at January 1, 2018. 1-b to 4. Prepare the necessary Journal entries.
Explanation / Answer
Required1-a. Determine the price of the bonds at January 1, 2018.
Issue price of bonds = (900000*5%*15.04630)+(900000*0.09722) = $764581.50 or $764582
1-b to 4. Prepare the necessary Journal entries.
Date account and explantion debit credit Jan 1 Cash 764582 Discount on bonds payable 135418 Bonds payable 900000 (To record bond issue)Related Questions
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