dollar.) 3. Journalize the issuance of the bonds on January 1, 2016, and payment
ID: 2579770 • Letter: D
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dollar.) 3. Journalize the issuance of the bonds on January 1, 2016, and payment of the first semiannual interest amount and amortization of the bond on June 30, 2016. Explanations are not required. P14AB-37A Determining the present value of bonds payable and journalizing using the effective-interest amortization method serenity, Inc. is authorized to issue 5%, 10-year bonds payable. On January 1, 2016, when the market interest rate is 8%, the company issues $700,000 of the bonds. The bonds pay interest semiannually. Requirements 1. How much cash did the company receive upon issuance of the bonds payable? (Round all numbers to the nearest whole dollar.) 2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round all numbers to the nearest whole dollar.) 3. Journalize the issuance of the bonds on January 1, 2016, and payment of the first semiannual interest amount and amortization of the bond on June 30, 2016. Explanations are not required.Explanation / Answer
1 5% 10 YEAR BOND OF 700,000, MARKET RATE 8% No of N=Bonds 700 One Bond 1000 Semi Annual Interest Rate 2.50% Market rate 4% n period 20 getting interest 25 each six month Price of the bond=25*(P/V,4%,20)+1000*(P/V,4%,20) Issue Price= $796.15*700=$557,305 Face value of the Bonds =700,000-557305=$142,695 Amortisation at each period of six month=142695/20=7134.75 2 Amortisation Table Amortisation Value of Bonds Interest Total Interest Expense Issue Price 5,57,305.00 1 30/06/2017 7,134.75 5,64,439.75 17,500.00 24,634.75 2 31/12/2017 7,134.75 5,71,574.50 17,500.00 24,634.75 3 30/06/2018 7,134.75 5,78,709.25 17,500.00 24,634.75 4 31/12/2018 7,134.75 5,85,844.00 17,500.00 24,634.75 5 30/06/2019 7,134.75 5,92,978.75 17,500.00 24,634.75 6 31/12/2019 7,134.75 6,00,113.50 17,500.00 24,634.75 7 30/06/2020 7,134.75 6,07,248.25 17,500.00 24,634.75 8 31/12/2020 7,134.75 6,14,383.00 17,500.00 24,634.75 9 30/06/2021 7,134.75 6,21,517.75 17,500.00 24,634.75 10 31/12/2021 7,134.75 6,28,652.50 17,500.00 24,634.75 11 30/06/2022 7,134.75 6,35,787.25 17,500.00 24,634.75 12 31/12/2022 7,134.75 6,42,922.00 17,500.00 24,634.75 13 30/06/2023 7,134.75 6,50,056.75 17,500.00 24,634.75 14 31/12/2023 7,134.75 6,57,191.50 17,500.00 24,634.75 15 30/06/2024 7,134.75 6,64,326.25 17,500.00 24,634.75 16 31/12/2024 7,134.75 6,71,461.00 17,500.00 24,634.75 17 30/06/2025 7,134.75 6,78,595.75 17,500.00 24,634.75 18 31/12/2025 7,134.75 6,85,730.50 17,500.00 24,634.75 19 30/06/2026 7,134.75 6,92,865.25 17,500.00 24,634.75 20 31/12/2026 7,134.75 7,00,000.00 17,500.00 24,634.75 3 Journal Entry Date Account Title Debit Credit 1-Jan-16 Cash 5,57,305.00 5,57,305.00 Date Account Title Debit Credit 30-Jun-16 Interest 24,635.75 5% Bond 7,134.75 Cash 17,500.00 Working Note: 4% Year Inflow Dis. Fact. PV 1 25 0.961538462 24.04 2 25 0.924556213 23.11 3 25 0.888996359 22.22 4 25 0.854804191 21.37 5 25 0.821927107 20.55 6 25 0.790314526 19.76 7 25 0.759917813 19.00 8 25 0.730690205 18.27 9 25 0.702586736 17.56 10 25 0.675564169 16.89 11 25 0.649580932 16.24 12 25 0.62459705 15.61 13 25 0.600574086 15.01 14 25 0.577475083 14.44 15 25 0.555264503 13.88 16 25 0.533908176 13.35 17 25 0.513373246 12.83 18 25 0.493628121 12.34 19 25 0.474642424 11.87 20 1025 0.456386946 467.80 796.15
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