1. (10 points) On January 1, 2018, Jones Jeans Co. buys a 8 year $1,000,000 face value bond from Rawlings Inc. The bonds pay semi-annual interest on January 1 and July The bonds are classified as held to maturity. Use the coupon rate 11% and Market yield rate 10%. To develop the following journal entries:

1. Find the price of the bond

1,100,000

2. Entry at acquisition.

Bond Investment $1,100,000

Cash $1,100,000

3. Entry to recognize semi-annual interest revenue at 7/1/18.

Cash $110,000

Interest revenue $110,000

4. Entry necessary if market value of the bond is $1,025,000 at 12/31/18.

No Entry

2. (10 points) Assume that Rawlings Inc. had issued $50 million, in total, of the bonds that were purchased by Jones Jeans Co. in number 1 (at price determined in problem 1). Prepare the journal entries.

a) at issuance

Cash $50,000,000

Bonds Payable $50,000,000

b) July 1 interest payments for Rawling Inc.

Interest Expense $2,750,000

Cash $2,750,000

3. (5 points) Using the information from question 1, prepare the entry at 12/31/18 for Jones Jeans Co. under the following assumptions.

1. Classified as available for sale

12/31/2018 Available-for-trading securities $1,054,189.81

Cash $1,054,189.81

2. Classified as trading.

12/31/2018 Investment in Trading Securities $1,054,189.81

Cash $1,054,189.81

I WOULD JUST LIKE TO KNOW IF THAT IS CORRECT AND IF NOT WHERE I WENT WRONG