The Bradford Company issued 10% bonds, dated January 1, with a face amount of $8
ID: 2500364 • Letter: T
Question
The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2013. The bonds mature on December 31, 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. 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.
Determine the price of the bonds at January 1, 2013. (Enter your answers whole dollars.)
Table value are based on:
N = ?
I = ?
Cash Flow……………Amount………..Present Value
Interest………………(? Amount)………(? PV)
Principal………….(? amount)………….(?PV)
Price of Bonds………. ?
2 - Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2013. (Enter your answers in whole dollars. If no journal entry is required for a transaction, select "No journal entry required" in the first account field.)
Record the bond issuance by the Bradford Company
3 - Prepare the journal entry to record interest on June 30, 2013 (at the effective rate). (Enter your answers in whole dollars. If no journal entry is required for a transaction, select "No journal entry required" in the first account field.)
Record the interest on June 30, 2013 (at the effective rate)
4 - Prepare the journal entry to record interest on December 31, 2013 (at the effective rate). (Enter your answers in whole dollars. If no journal entry is required for a transaction, select "No journal entry required" in the first account field.)
Record the interest on December 31, 2013 (at the effective rate)
The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2013. The bonds mature on December 31, 2022 (10 years). For bonds of similar risk and maturity, the market yield is 12%. 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.)
Explanation / Answer
Table of amortisation
Year Interest PV Factor @6% PV of cash flow 1 4000000 0.9434 3773584.906 2 4000000 0.8900 3559985.76 3 4000000 0.8396 3358477.132 4 4000000 0.7921 3168374.653 5 4000000 0.7473 2989032.691 6 4000000 0.7050 2819842.162 7 4000000 0.6651 2660228.454 8 4000000 0.6274 2509649.485 9 4000000 0.5919 2367593.854 10 4000000 0.5584 2233579.108 11 4000000 0.5268 2107150.102 12 4000000 0.4970 1987877.454 13 4000000 0.4688 1875356.089 14 4000000 0.4423 1769203.858 15 4000000 0.4173 1669060.243 16 4000000 0.3936 1574585.135 17 4000000 0.3714 1485457.674 18 4000000 0.3503 1401375.165 19 4000000 0.3305 1322052.042 20 4000000 0.3118 1247218.908 redemption 80000000 0.3118 24944000 Value of Bond 70823684.87Related Questions
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