19. Recording Bond Transactions-Issuer (10 points) On January 1, 2009, Mania Ent

Question

19. Recording Bond Transactions-Issuer (10 points) On January 1, 2009, Mania Enterprises issued 12% bonds amount of s20 million. The bonds mature in 2018 (10 years). For bonds of similar riskx and maturity, the market yield is 10%. Interest is paid semiannual You may round all amounts to the nearest $1 if necessary datedJanuaryofsi ilar iskande ly on June 30 and December 31. 2009, with a face f similar risk and Ma 1. Determine the price of the bonds at January 1, 2009. Show your calculation 2. Prepare the journal entry to record the bond issuance by Mania on January 1, 2009. 3. Prepare the jounal entry to record interest on June 30, 2009, using the effective interest method. 4. Prepare the journal entry to record interest on December 31, 2009, using the effective interest method. 5. Prepare the journal entry to record the maturity of the bonds in 2018 (assume that the final interest payment has already been recorded).

Explanation / Answer

Face value 20 million interst 2.4 (PVAF 10yrs10%) 6.14456 PV interest 14.746944 PVIF 0.38554 PV facevalue 7.7108 Price of bond           22.46 million Journal Debit Credit Cash 20 Bonds payable 20 Interest exp 1.2 Interest payable 1.2 Interest exp 1.2 Interest payable 1.2 Bond payable 20 cash 20

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