January 1, 2017: Mega Corporation issued 20 year, 9% bonds with a face value of

Question

January 1, 2017: Mega Corporation issued 20 year, 9% bonds with a face value of 2,875,000. The bonds were solid yield 8%. Interest is payable semi-annually on January 1 and July 1.

1. What is the issue price of the bonds (please show all work) ?

2. Using EXCEL, prepare an amortization table for the entire bond term. (Table should be properly labeled and neatly presented. Amounts should have commas and be rounded to the nearest dollar)

3. Record the bond issuance on 1/1/17.

4. Assume the company prepares financial statements semi annually on June 30 and December 31. Prepare the apropriate adjusting entries for June 30, 2017 and December 31, 2017 for interest and for amortization of the discount or premium. Use effective method amortization

5. What accounts related to this bond would be shown on the 12/31/17 balance sheet. Show in the proper sections

Liabilities

Current Liabilities:

Long-term Liabilities:

Explanation / Answer

1.

2. Amortization Table

3. Journal Entry to record Bond Issue

5. The below account will be shown as on Dec 31

Issue Date 1-Jan-17 Expression in Formula Adjusted for Semi-annual Coupon Payment Period (Yrs) 20 t 40 Coupon Rate 9% c 4.5% FV                     2,875,000 F Bond Yeild 8% r 4.0% Interest Payment Jan1 & Jul 1

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