The Gorman group issued 900000 of 13% bonds on june 30 2006.The bonds were dated
ID: 2433969 • Letter: T
Question
The Gorman group issued 900000 of 13% bonds on june 30 2006.The bonds were dated on june 30 and mature on june 30 2026 20years. The market yield for bonds of similar risk and matuirty is12% interest is paid semiannually on dec 31 and june 30. 1. determine price of the bonds at june 30 2006. Interest=? Principal=? Present value of the bonds=? 2. Prepare the journal entry to record their issuance by thegorman group on june 30 2006 _________ __________ _________ ___________ __________ ___________ 3. Prepare the journal entry to record interest on dec 31 2006at the effective rate __________ _________ __________ __________ ___________ ___________ 4. prepare the journal entry to record on june 30 2007 at theeffective rate __________ __________ ___________ __________ ___________ _________ The Gorman group issued 900000 of 13% bonds on june 30 2006.The bonds were dated on june 30 and mature on june 30 2026 20years. The market yield for bonds of similar risk and matuirty is12% interest is paid semiannually on dec 31 and june 30. 1. determine price of the bonds at june 30 2006. Interest=? Principal=? Present value of the bonds=? 2. Prepare the journal entry to record their issuance by thegorman group on june 30 2006 _________ __________ _________ ___________ __________ ___________ 3. Prepare the journal entry to record interest on dec 31 2006at the effective rate __________ _________ __________ __________ ___________ ___________ 4. prepare the journal entry to record on june 30 2007 at theeffective rate __________ __________ ___________ __________ ___________ _________Explanation / Answer
Interest is 58,500 (semiannual with 6.5% interest) PVA = 58,500 * 15.046 (annuity factor, 40 periods, 6%, market yieldis 12% per annual) = 880,208 PV = 900,000* 1 / (1+0.06)40 = 87,500 Total PV = 880,208 + 87,500 = 967,708 June 30 2006 Cash 967,708 Premium on BondPayable 67,708 BondPayable 900,000 Dec 31 2006 InterestExpense 58,062 Premium on BondPayable 438 Cash 58,500 Cash payment = 900,000 * 6.5 % Interest Expense = Book Value * 6% = 967,708 * 6% Book Value after interest payment = 967,708 - 438 = 967,270 Jun 30 2007 InterestExpense 58,036 Premium on BondPayable 464 Cash 58,500 Cash payment = 900,000 * 6.5 % Interest Expense = Book Value * 6% = 967,270 * 6% Book Value after interest payment = 967,270 - 464 = 966,806
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.