(1) The question is on the left side of this page. However, I added a solved exa
ID: 2416735 • Letter: #
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(1) The question is on the left side of this page. However, I added a solved example with its explanation of a very similar exercise but with different numbers. (Just to guide you if needed - the method used to answer this question must be the same method used to solve the example I provided on the right side of the page).
The Bradford Company issued 8% bonds, dated January 1, with a face amount of $100 million on January 1, 2016 to Saxton-Bose Corporation. The bonds mature on December 31, 2,035 (20 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (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.) Required 1. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2016, The Bradford Company issued 8% bonds, dated January 1, with a face amount of $70 million on January 1 2016 to Saxton-Bose Corporation. The bonds mature on December 31, 2,030 (15 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (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.) interest revenue on June 30, 2016 and interest revenue on December 31, 2016 (at the effective rate). (Enter your answers in whole dollars- lf no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Date General Journal Debit Credit January 01, 2016 Bond investment 100,000,000 Required 1. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2016 17,158,640./008% 82,841,360, 001% Discount on bond investment interest revenue on June 30, 2016 and interest revenue on December 31, 2016 (at the effective rate). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Cash June 30, 2016 4,000,000 142,068-0.18% Cash Discount on bond investment Interest revenue 4,142,068-001% view transaction list journal entry worksheet Date General Journal Debit Credit December 31, 2016 4,000,000 149,171-0334 Cash Bond investment Discount on bond investment Cash January 01, 2016 70,000,000 Discount on bond investment Interest revenue 4,149, 171-1002% January 1, 2016 Cash Discount on bond investment Interest revenue June 30, 2016 Interest $ 4,000,000¥x 17.15909. S88·636,360 Principal $100,000,000 x 0.14205 "-14,205,000 Present value (price) of the bonds S82,841,360 December 31, 2016 Cash ¥ 4%x $100,000,000 Discount on bond investment Present value of an ordinary annuity of $1 : n 40, i 596 (PVA of $1 ) ** Present value of $1 : n=40, i=5% (PV of $1) Interest revenue 2. June 30, 2016 Cash (4% $100,000,000) S4,000,000 Interest revenue (5% × $82,841,360-$4,142,068 3. December 31, 2016 Cash (4% $100,000,000) S4,000,000 Interest revenue (5% × [$82,841,360 + $142,068]-$4,149,171Explanation / Answer
1.
1 jan2016:
bond investment a/c dr. 70000000
To discount on bond investmetn a/c 10759000
To cash a/c 59241000
(interest = 2800000*15.3725=43043000, principle= 70000000*.2314 =16198000)
30-6-2016
cash a/c dr 2800000
discount on bond interest a/c 1962050
To interest revenue a/c 2962050
31-12-2016
cash a/c dr. 2800000
discount on bond interest a/c 260153
to interest revenue a/c 3060153
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