Stowers Research issues bonds dated January 1, 2011, that pay interest semiannua

Question

Stowers Research issues bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. Required: Consider each of the following three separate situations. (Use Table B.1, Table B.3) 1. The market rate at the date of issuance is 10%. (a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Issue price $ (b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) General Journal 2. The market rate at the date of issuance is 12%. (a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Issue price $ (b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) General Journal 3. The market rate at the date of issuance is 14%. (a) Determine the bonds' issue price on January 1, 2011. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Issue price $ (b) Prepare the journal entry to record their issuance. (Round "PV Factors" to 4 decimal places, intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.) General Journal

Explanation / Answer

hey refer this example it will help you: A company issues $500,000 of 9% bonds that pay interest semiannually and mature in 10 years. Calculate the bond issue price assuming the bond's market rate is 8% per year. I have a calculator that can solve it, but i'm not sure which values go where Solution: To calculate the Price of the bond, we’ll use the following symbols: (pv1,i,n) = present value of $1 discounted at i%, n periods from the present (pva,i,n) = present value of an annuity of $1 discounted at i%, for n periods The price of the bond is $500,000(pv1, 4%,20) + 9%(0.5)($500,000)(pva, 4%, 20) Using the npv tables attached, this = $500,000(0.45639) + 9%(0.5)($500,000) (13.59033) = $228,195 + $305,782.43 = $533,977.43

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