1. [The following information applies to the questions displayed below.]

MBTA Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2014. The stated interest rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been completed (amounts in thousands):

Date

Cash

Interest

Amortization

Balance

January 1, 2014

$

48,918

End of Year 2014

$

3,640

$

3,421

$

219

48,699

End of Year 2015

3,640

?

?

48,468

End of Year 2016

3,640

?

?

?

End of Year 2017

3,640

?

?

48,000

Date	Cash	Interest	Amortization	Balance
January 1, 2014				$48,918
End of Year 2014	$3,640	$3,421	$219	$48,699
End of Year 2015	$3,640	$3,408	$231	$48,468
End of Year 2016	$3,640	$3,393	$247	$48,221
End of Year 2017	$3,640	$3,375	(not 265???)	$48,000

2.

Trew Company plans to issue $904,000, 5-year, 6 percent bonds. Interest is payable semiannually on June 30 and December 31. All of the bonds will be sold on January 1, 2014. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Determine the issuance price of the bonds assuming a market yield of 8 percent.

Issuance price: __________________?

3.

On January 1, 2014, Clearwater Corporation sold a $760,000, 8 percent bond issue (9 percent market rate). The bonds were dated January 1, 2014, pay interest each December 31, and mature in 8 years. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Required:

a.)

Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
January 01, 2014	Cash	717,960
	Discount on bonds payable	42,040
	Bonds payable		760,000

b.)

Prepare the journal entry to record the interest payment on December 31, 2014. Use straight-line amortization. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
December 31, 2014	Interest expense	???????
	Discount on bonds payable		5,255
	Cash	????????

4.

James Corporation is planning to issue $501,000 worth of bonds that mature in 4 years and pay 6 percent interest each June 30 and December 31. All of the bonds will be sold on January 1, 2014. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Required:

Compute the issue (sale) price on January 1, 2014, for each of the following independent cases:

a.)

Case A: Market (yield) rate, 4 percent.

Issue price:______________?

b.)	Case B: Market (yield) rate, 6 percent.
	Issue price:______________?

c.)

Case C: Market (yield) rate, 8 percent.

Issue price:______________? 5. Willams Company plans to issue $607,000, 10-year bonds that pay 4 percent payable semiannually on June 30 and December 31. All of the bonds will be sold on January 1, 2014. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Determine the issuance price of the bonds assuming a market yield of 4 percent. Issuance price:_______________?