Pacifc Organics Ltd. has a number of commercial greenhouse operations in British Columbias Fraser Valley. To finance

Question:

Pacifc Organics Ltd. has a number of commercial greenhouse operations in British Columbia’s Fraser Valley. To finance the additional real estate and greenhouses necessary to meet the increasing demand for the company’s products, the company decided to issue bonds. On January 1, it issued five-year, semi-annual bonds with a face value of $80 million. The contract rate on the bonds was 4.5% and the bonds were issued at 97.8 to yield 5%. Interest payments are to be made each June 30 and December 31.

Required:

a. Determine the proceeds on issuance of the bonds and prepare the journal entry to record the bonds’ sale on January 1.

b. Provide the journal entries to record the first two interest payments.

c. What amount will be reported for the bond liability on the company’s statement of financial position at December 31 of the first year?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...