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Item 2

Item 2 6.66 points Item Skipped

Exercise 14-7 (Algo) Determine the price of bonds; issuance; straight-line method [LO14-2]

Universal Foods issued 12% bonds, dated January 1, with a face amount of $250 million on January 1, 2021. The bonds mature on December 31, 2035 (15 years). The market rate of interest for similar issues was 14%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2021. 2. to 4. Prepare the journal entries to record their issuance by Universal Foods on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2028.

Determine the price of the bonds at January 1, 2021. (Round final answers to the nearest whole dollars.)

• 1

  Record the issuance of the bond on January 1, 2021.

• 2

  Record the interest on June 30, 2021.

• 3

  Record the interest on December 31, 2028