On January 1, 2018, Vandenplas issues $800,000 of 8% bonds, duein ten years, with interest payable semiannually on June 30 andDecember 31 each year. Assuming the market interest rate on theissue date is 9%, the bonds will issue at $747,968.
Record the bond issue on January 1, 2018, and the first foursemi-annual interest payments on June 30, 2018, December 31, 2018,June 30, 2019, and December 31, 2019.
On January 1, 2018, Vandenplas issues $800,000 of 8% bonds, duein ten years, with interest payable semiannually on June 30 andDecember 31 each year. Assuming the market interest rate on theissue date is 9%, the bonds will issue at $747,968.
Record the bond issue on January 1, 2018, and the first foursemi-annual interest payments on June 30, 2018, December 31, 2018,June 30, 2019, and December 31, 2019.
Related questions
On January 1, 2018, White Water issues $560,000 of 6% bonds, duein 20 years, with interest payable annually on December 31 eachyear.
Assuming the market interest rate on the issue date is 5%, thebonds will issue at $629,789.
Required:
1. Complete the first three rows of an amortizationtable.
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2. Record the journal entries for bond issue onJanuary 1, 2018, and the first two interest payments on December31, 2018, and December 31, 2019.
Federal Semiconductors issued 8% bonds, dated January 1, with a face amount of $850 million on January 1, 2018. The bonds sold for $771,793,266 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 9%. Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $760 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2019 had risen to $766 million. Required: Complete the below table to record the following journal entries. 1. & 2. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.
| semi-annual interest period-end | cash interest paid | bond interest expense | increase in balance | carrying value | far value | unrealized holding gain/loss |
|---|---|---|---|---|---|---|
| 01/01/2018 | 771,793,266 | |||||
| 06/30/2018 | ? | ? | ||||
| 12/31/2018 | ? | ? | 760,000,000 | ? | ||
| 06/302019 | ? | |||||
| 12/31/2019 | ? | 766,000,000 | ? | |||
| Bonds Payable | BP | Fair Value Adjustment | FVA | |||
| 01/01/2018 | 771,793,266 | |||||
| 06/30/2018 | ||||||
| 12/31/2018 | ||||||
| 771,793,266 | ||||||
| 06/30/2019 | ||||||
| 12/31/2019 | ||||||
| 771,793,226 | ||||||
