On July 1, 2017, McVay Corporation issued $15 million of 10-year bonds with an 8% stated interest
Question:
On July 1, 2017, McVay Corporation issued $15 million of 10-year bonds with an 8% stated interest rate. The bonds pay interest semiannually on June 30 and December 31 of each year. The market rate of interest on July 1, 2017, for bonds of this type was 10%. McVay closes its books on December 31.
Required:
1. At what price were the bonds issued?
2. Using the effective interest method, prepare an amortization schedule showing interest expense, discount or premium amortization, and bond carrying value for each of the first four semiannual interest payment periods.
3. Prepare journal entries to record the first four semiannual interest payments.
4. How should the bonds be shown on McVay's December 31, 2017, balance sheet and on its December 31, 2018, balance sheet?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Requirement 1 The issuance price of the bonds on July 1 2017 is equal to the present value of the principal repayment plus the present value of the se...View the full answer
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
