Analyzing and Reporting Financial Statement Effects of Bond Transactions On Janu

Question

Analyzing and Reporting Financial Statement Effects of Bond Transactions
On January 1, 2012, Trueman Corporation issued $900,000 of 20-year, 11% bonds for $832,292, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.

(a) Confirm the bond issue price.

Round answers to the nearest whole number.

(b) Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and discount amortization on June 30, 2012, and (3) semiannual interest payment and discount amortization on December 31, 2012.

Round answers to the nearest whole number. Use negative signs with answers, when appropriate.

Balance Sheet

Noncash

Assets

Contributed

Capital

Earned

Capital

Income Statement

Net

Income

Present value of principal repayment $Answer Present value of interest payments $Answer Selling price of bonds $ 832,292

Explanation / Answer

2

Amount PV factor 12%/2, period 40 Present Value Present value of principal repayment 900000 0.0972 87,500 Present value of interest payments (900000*11%/2) 49500 15.0463 744,792 Selling price of bonds 832,292

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