n January 1st 2017, the ACME Company issued (sold) $1,000,000 10% 12 year semi-a

Question

n January 1st 2017, the ACME Company issued (sold) $1,000,000 10% 12 year semi-annual bonds when the market rate of interest was 8%. These bonds pay interest semiannually on July 1 and January 1. part a:make the journal entry ACME makes when it sold the bonds part b: make the journal entry ACME makes when it makes the first interest payment on 7/1/17 part c: ake the journal entry ACME makes on December 31, 2017 connected with these bonds part d: fill in the table value carry value of debt interest exp new carry value of debt 0 payment 1/1/2017 7/1/2017 1/1/2018 7/1/2018 1/1/2019 On 1/1/2019 ACME retired the bonds at 101. Make the necessary journal entry for the retirement of the bonds. part e:

Explanation / Answer

1 10% 12 YEAR BOND OF 1,000,000 No of N=Bonds 10000 One Bond 100 Semi Annual Interest Rate 5% Market rate semi annual 4% n period 24 getting interest 5 each six month Value of a bond=5*(PVIF,4%,24)+1000*(PVIF,4%,24) Total Value of bonds Issue Price                        115.25 no of Bonds                  10,000.00 Total Issue Value                  11,52,470 Preimum onFace value of the Bonds =1152470-1000000=152,470 Amortisation at each period of six month=152470/24=6,353 2 Amortisation Table Issue Price Amortisation Carrying Value Interest Total Interest Expense 0 01/01/2017          11,52,470 1 01/07/2017                     6,353.00          11,46,117    50,000.00    43,647.00 2 01/01/2018                     6,353.00          11,39,764    50,000.00    43,647.00 3 01/07/2018                     6,353.00          11,33,411    50,000.00    43,647.00 4 01/01/2019                     6,353.00          11,27,058    50,000.00    43,647.00 3 Journal Entry Date Account Title Debit Credit 1-Jan-17 Cash                  11,52,470 10% Bonds          11,52,470 Date Account Title Debit Credit 1-Jul-17 Interest                        43,647 10% Bond                           6,353 Cash                50,000 Date Account Title Debit Credit 31-Dec-17 Interest                        43,647 10% Bond                           6,353 Interest Accrued but not due                50,000 Date Account Title Debit Credit 1-Jan-19 Interest                        43,647 10% Bond                           6,353 Cash                50,000 Date Account Title Debit Credit 1-Jan-19 10% Bond                  11,27,058 Gain on redemption of Bond            1,17,058 Diffrence amount Cash          10,10,000 101*10000 Working Note: 4% Year Inflow Dis. Fact. PV 1 5              0.96154              4.81 2 5              0.92456              4.62 3 5              0.88900              4.44 4 5              0.85480              4.27 5 5              0.82193              4.11 6 5              0.79031              3.95 7 5              0.75992              3.80 8 5              0.73069              3.65 9 5              0.70259              3.51 10 5              0.67556              3.38 11 5              0.64958              3.25 12 5              0.62460              3.12 13 5              0.60057              3.00 14 5              0.57748              2.89 15 5              0.55526              2.78 16 5              0.53391              2.67 17 5              0.51337              2.57 18 5              0.49363              2.47 19 5              0.47464              2.37 20 5              0.45639              2.28 21 5              0.43883              2.19 22 5              0.42196              2.11 23 5              0.40573              2.03 24 105              0.39012            40.96     115.2470

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.