ERA ARS Sofia Corporation issued 5,000 ofits 10% $1,000 par value bonds when the
ID: 2339198 • Letter: E
Question
ERA ARS Sofia Corporation issued 5,000 ofits 10% $1,000 par value bonds when the market rate is 85%for similar bonds. The bonds are dated January 1, 20x0 and will mature in twelve years. Interest is payable semiannually on January 1 and July 1 of each year. The company uses the effective interest method to amortize any premium or discount on bonds. The company's fiscal year is the calendar year. REQUIRED: (1) Compute the price of the bonds on January 1, 20X0. Round all calculations to the nearest whole dollar (2) Using the attached forms, prepare an amortization schedule for these bonds through the January 1, 20X2 interest payment. Round all calculations to the nearest whole dollar (3) Using the attached forms, prepare all general journal entries, in proper form, that should be made during calendar years 20xO and 20X1 for these bonds. Show supporting calculations and round all answers to the nearest whole dollar. Provide a brief explanation for each entryExplanation / Answer
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Computation of bond price Table values are based on: n= 24 i= 4.25% Cash flow Table Value Amount Present Value Par (Maturity) Value 0.36828 $5,000,000 $1,841,384 Interest (Annuity) 14.86407 $250,000 $3,716,018 Price of bonds $5,557,403Related Questions
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