Result Reviewer semiannually on June 30 and December 30 and are due December 31,

Question

Result Reviewer semiannually on June 30 and December 30 and are due December 31,2016. Assumed the company sells the bonds for S 102,458.71 to yield 12%. Prepare the journal entries using the straight-line method. V. The Taylor Company issued $100,000 of 13% bonds on January 1, 2014. The bond pay interest - - (1) the sale of the bonds. (5 marks) (2) Each 2014 semiannual interest payment and premium amortization, using the effective interest method. (10 marks) (3) Please tell whether the bonds is sold at par, premium or discount. (S marks) Contract rate is 6% Ifthe market rate is 4% If the market rate is 6% 2) If the market rate is 7% Bonds sells at:

Explanation / Answer

Workings Par Value of the bonds = $1,00,000.00 Issue price of the bond= $1,02,458.71 Discount to be amortized = $2,458.71 Coupon rate of interest = 13% Coupon Amount = $13,000.00 Coupon Amount Half yearly = $6,500.00 Interest amortized = $2,458.71 Period for Amortization = 3 Years X 2 =                                    6.00 Periods Interest Amortzed per Half yearly = $409.79 Answer =1 & 2) Working Notes: for calculation of the interest expenses for June 30 & December 30 Coupon Amount = $6,500.00 Add: Amortization value $409.79 Total interest expesnes $6,090.21 For Issuance of Bonds Journal Entries Date Account Title and explanation Debit Credit Jan, 01 2014 Cash $                       1,02,459       To 13% Bonds $             1,00,000       To Premium on issuance of Bonds $                   2,459 (to record the issuance of the bonds) Journal Entries Date Account Title and explanation Debit Credit June, 30 2014 Interest Expenses $                       6,090.21 Premium on issuance of bonds $                           409.79         To Cash $             6,500.00 (To Record the Payment interest expenses ) Journal Entries Date Account Title and explanation Debit Credit Dec, 30 2014 Interest Expenses $                                    -   Premium on issuance of bonds Debit         To Cash #VALUE! (To Record the Payment interest expenses ) Answer = 3) Contract rate is 6% Bonds Sell at 1) If the market rate is 4% = Premium 2) If the market rate is 6% = Par 3) If the market rate is 7% = Discount

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