Banjo Education Corp. issued a 4%, $180,000 bond that pays interest semiannually

Question

Banjo Education Corp. issued a 4%, $180,000 bond that pays interest semiannually each June 30 and December 31. The date of issuance was January 1, 2017. The bonds mature after four years. The market interest rate was 6%. Banjo Education Corp.’s year-end is December 31. (Use TABLE 14A.1 and TABLE 14A.2.)

Required:
Preparation Component:
1. Calculate the issue price of the bond. (Use appropriate factor(s) from the tables provided. Round the final answer to the nearest whole dollar.)

2. Prepare a general journal entry to record the issuance of the bonds. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.)

Record the sold bonds on original issue date. - Jan 01

3. Determine the total bond interest expense that will be recognized over the life of these bonds. (Do not round intermediate calculations. Round your answer to the nearest whole dollar.)

4. Prepare the first two years of an amortization table based on the effective interest method. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar. Enter all the amounts as positive values.)

5. Present the journal entries Banjo would make to record the first two interest payments. (Do not round intermediate calculations. Round the final answers to the nearest whole dollar.)

1.Record the six months’ interest and discount amortization.

2.Record the six months’ interest and discount amortization.

Total bond interest expense Rate Periods 1% 2% 3% 5% 6% 7% 8% 10% 12% 0.9901 0.4804 0.70 0.9615 0.524 0.9434 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.7355 1.6901 1.6257 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.486 2.4018 2.2832 3.9020 3.8077 3.7171 3.62 3.5460 3.4651 3.3872 3.3121 3.2397 3.169 3.0373 2.8550 4.8534 4.7135 4.5774.4518 4.325 4.2124 4.1002 3.9927 3.8897 3.7408 3.6048 3.3522 5.7955 5.6014 5.4172 5.2421 5.0757 4.173 4.7665 4.622 4.4859 4.3553 4.1114 3.7845 6.7282 6.4720 6.2303 6.0021 5.78645.5824 5.3893 5.2064 5.0330 4.8684 4.5638 4.1604 7.6517 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.3349 4.9676 4.4873 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.246 5.952 5.759O 5.3282 4.7716 4.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.6502 5.0188 11 10.3676 9.7868 .2526 8.7605 8.3064 7.8869 7.4987 7.1340 6.8052 6.4951 5.9377 5.2337 12 11.2551 10.5753 q.q540 q.3851 8.8633 8.3838 7.4427 7.5361 7.1607 6.8137 6.1944 6.4206 12.1337 11.3484 10.6350 9.9856 9.3436 8.8527 8.3577 7.9038 7.486 7.1034 6.4235 5.5831 .250 8.7455 8.2442 7.7862 7.3667 6.6282 5.7245 15 13.8651 12.8493 11.9379 11.1184 10.3797 q.7122 q1074 8.5595 8.0607 T.6061 6.8109 58474 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 6.9740 5.542 15.5623 14.291 13.1661 12.1657 11.2741 10.4773 .7632 .1216 8.5436 8.0216 7.116 6.0472 18 16.3483 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 .3719 8.7556 8.2014 7.247 6.1280 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 .6036 8.9501 8.364 7.3658 6.1982 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5440 9.8181 .1285 8.5136 7.4694 6.2593 25 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 .0770 7.8431 6.4641 30 25.8077 22.365 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.426 8.0552 6.5660 29.4086 24.9986 21.4872 18.6646 16.3742 14.4982 12.9477 11.6546 10.5668 9.6442 8.1755 6.6166 40 32.8347 27.3555 23.1148 19.7928 17.1541 15.0463 13.3317 11.9246 10.7574 4.7741 8.2438 6.6418 2 3 4 6 8 10 13 14 13.0037 12.1062 11.2961 10.5631 4.8986 16 17 19 20 35 TABLE 14A.2 Present Value of an Annuity of 1 Period

Explanation / Answer

1) principal 180,000 interest 180,000*4%*1/2= 3600 issue price of bonds where i= 3% n= 8 years principal * PV of $1 = amount 180,000 * 0.7894 = 142092 interest * PV of annuity 3,600 * 7.0197 = 25271 bond isse price 167363 answer 2) Date Account titles & Explanations Debit Credit 1/1/2017 Cash 167363 Discount on bonds 12637 Bonds payable 180000 3) total bond interest that will be recognised over the life of bonds 8 payments of 3,600 28800 add:par value of bonds 180,000 total repaid 208800 less issue price of bonds -167363 total bond interest that will be recognised over the life of bonds 41437 answe 4) period cash intt period Discount unamortiz Carrying ending paid intt exp amortized discount value 3% jan1/17 12637 167363 june 30/17 3,600 5021 1421 11216 168784 dec 31/17 3,600 5064 1464 9753 170247 june30/18 3,600 5107 1507 8245 171755 dec31/18 3,600 5153 1553 6693 173307 5) Date Account titles & Explanations Debit Credit 6/30/2017 interest expense 5,021 Discount on bonds 1,421 Cash 3,600 12/31/2017 interest expense 5064 Discount on bonds 1464 Cash 3,600

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