Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.)
Required:
Consider each of the following three separate situations.
1.
The market rate at the date of issuance is 10%.
(a)
Complete the below table to determine the bonds' issue price on January 1, 2015.
Table values are based on:
n =
20
i =
5.0%
Cash Flow
Table Value
Amount
Present Value
Par (maturity) value
0.3769
$31,000
$11,684
Interest (annuity)
12.4622
$1,860
23,180
Price of bonds
$34,864
(b)
Prepare the journal entry to record their issuance.
Date
General Journal
Debit
Credit
Jan 01, 2015
Cash
34,864
Premium on bonds payable
3,864
Bonds payable
31,000
The market rate at the date of issuance is 12%.
(a)
Complete the below table to determine the bonds' issue price on January 1, 2015.
Table values are based on:
n =
i =
6.0%
Cash Flow
Table Value
Amount
Present Value
Par (maturity) value
Interest (annuity)
Price of bonds
(b)
Prepare the journal entry to record their issuance.
Journal Entry Worksheet
· Record the issue of bonds with a par value of $31,000 cash on January 1, 2015. Assume that the market rate of interest at the date of issue is 12%.
Date
General Journal
Debit
Credit
Jan 01, 2015
Cash
The market rate at the date of issuance is 14%.
(a)
Complete the below table to determine the bonds' issue price on January 1, 2015.
Table values are based on:
n =
i =
7.0%
Cash Flow
Table Value
Amount
Present Value
Par (maturity) value
Interest (annuity)
Price of bonds
(b)
Prepare the journal entry to record their issuance.
Journal Entry Worksheet
· Record the issue of bonds with a par value of $31,000 cash on January 1, 2015. Assume that the market rate of interest at the date of issue is 14%.
Date
General Journal
Debit
Credit
Jan 01, 2015
Cash
Bonds payable
Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $31,000 par value and an annual contract rate of 12%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) |
Required: |
Consider each of the following three separate situations. |
1. | The market rate at the date of issuance is 10%. |
(a) | Complete the below table to determine the bonds' issue price on January 1, 2015. |
|
(b) | Prepare the journal entry to record their issuance. |
Date | General Journal | Debit | Credit |
Jan 01, 2015 | Cash | 34,864 | |
Premium on bonds payable | 3,864 | ||
Bonds payable | 31,000 |
|
(a) | Complete the below table to determine the bonds' issue price on January 1, 2015. |
|
(b) | Prepare the journal entry to record their issuance. |
Journal Entry Worksheet
· Record the issue of bonds with a par value of $31,000 cash on January 1, 2015. Assume that the market rate of interest at the date of issue is 12%.
Date | General Journal | Debit | Credit |
Jan 01, 2015 | Cash | ||
The market rate at the date of issuance is 14%. | |
(a) | Complete the below table to determine the bonds' issue price on January 1, 2015. | |||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
(b) | Prepare the journal entry to record their issuance. |
Journal Entry Worksheet
· Record the issue of bonds with a par value of $31,000 cash on January 1, 2015. Assume that the market rate of interest at the date of issue is 14%.
Date | General Journal | Debit | Credit |
Jan 01, 2015 | Cash | ||
Bonds payable |