In 1979, the Central Power Company issued ($ 2) million bonds in two series, A and B.

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In 1979, the Central Power Company issued \(\$ 2\) million bonds in two series, A and B. Each series had face amount of \(\$ 1\) million and was issued at prices to yield 7 percent. Issue A contained semiannual 6 -percent coupons. Issue B contained 8 -percent semiannual coupons. In 1980, Central Power issued series C, with face amount of \(\$ 1\) million. This issue contained 8 -percent semiannual coupons; the effective yield at time of issue was 8.6 percent. Issues \(\mathrm{A}, \mathrm{B}\), and \(\mathrm{C}\) all mature 30 years from issue date.

Answer the following questions for issue A. Round amounts to the nearest dollar.
a What is the issuing price of the bonds?
b Make the journal entry for the date of bond issue.
c Using the effective-interest method, show the journal entries made on the first semiannual interest payment date.
d Repeat part \(\mathbf{c}\) for the second and third payment dates.
e Show the semiannual entry if straight-line amortization of discount (or premium) is used.

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Financial Accounting An Introduction To Concepts Methods And Uses

ISBN: 9780030452963

2nd Edition

Authors: Sidney Davidson, Roman L. Weil, Clyde P. Stickney

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