McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2011. The bonds

Question:

McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2011. The bonds mature on December 31, 2030 (20 years). For bonds of similar risk and maturity, the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $400,000 of the bonds as a long-term investment.


Required:

1. Determine the price of the bonds issued on January 1, 2011.

2. Prepare the journal entries to record

(a) Their issuance by McWherter and

(b) Blanton's investment on January 1, 2011.

3. Prepare the journal entries by

(a) McWherter and

(b) Blanton to record interest on June 30, 2011 (at the effective rate).

4. Prepare the journal entries by

(a) McWherter and

(b) Blanton to record interest on December 31, 2011 (at the effective rate).

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0077400163

6th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

Question Posted: