On January 1, 2016, Bradley Recreational Products issued$100,000, 13%, four-year bonds. Interest is paid semiannually onJune 30 and December 31. The bonds were issued at $97,014 to yieldan annual return of 14%. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1 ) (Use appropriate factor(s) fromthe tables provided.)
Required:
1. Prepare an amortization schedule that determines interest at theeffective interest rate.
2. Prepare an amortization schedule by the straight-linemethod.
3. Prepare the journal entries to record interest expense on June30, 2018, by each of the two approaches. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field.)
Record interest expense on June 30, 2018, by the effectiveinterest method.
Record interest expense on June 30, 2018, by the straight-linemethod.
Assuming the market rate is still 14%, what price would a secondinvestor pay the first investor on June 30, 2018, for $14,000 ofthe bonds?
On January 1, 2016, Bradley Recreational Products issued$100,000, 13%, four-year bonds. Interest is paid semiannually onJune 30 and December 31. The bonds were issued at $97,014 to yieldan annual return of 14%. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1 ) (Use appropriate factor(s) fromthe tables provided.)
| Required: |
| 1. | Prepare an amortization schedule that determines interest at theeffective interest rate.
|
Related questions
The Gorman Group issued $920,000 of 9% bonds on June 30, 2016,for $1,011,047. The bonds were dated on June 30 and mature on June30, 2036 (20 years). The market yield for bonds of similar risk andmaturity is 8%. Interest is paid semiannually on December 31 andJune 30.
| Required: |
| Complete the below table to record the company's journal entry.(Enter interest rate to 1 decimal place. (i.e. 0.123 shouldbe entered as 12.3).)
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Universal Foods issued 12% bonds, dated January 1, with a faceamount of $225 million on January 1, 2016. The bonds mature onDecember 31, 2025 (10 years). The market rate of interest forsimilar issues was 14%. Interest is paid semiannually on June 30and December 31. Universal uses the straight-line method. (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 tablesprovided.) |
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1. | Determine the price of the bonds at January 1, 2016.(Enter your answer in whole dollars.) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 5. | What is the amount(s) related to the bonds that Patey willreport in its balance sheet at December 31, 2016? ////////////
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Effective Interest Discount Amortization
Chowan Corporation issued $190,000 of 10% bonds dated January 1,2013, for $183,982.19 on Janauary 1, 2013. The bonds are dueDecember 31, 2016, were issued to yield 11%, and pay interestsemiannually on June 30 and December 31. Chowan uses the effectiveinterest method of amortization.
In addition, prepare a bond interest expense and discountamortization schedule for the bonds through June 30, 2014.
Chowan Corporation
Bond Interest Expense and Discount Amortization Schedule(Partial)
Effective Interest Method
10% Bonds Sold to Yield 11%
| Date | Cash | Interest Expense | Unmortized Discount | Book Value of Bonds |
| Credit | Debit | Credit | ||
| 01/01/13 | $183,982.19 | |||
| 06/30/13 | $9,500 | $10,119.02 | $619.02 | $????? |
| 12/31/13 | $9,500 | $10,153.07 | $653.07 | $185,254.28 |
| 06/30/14 | $9,500 | $10,188.99 | $688.99 | $185,943.27 |
