Garcia Company issues 10.50%, 15-year bonds with a par value of $430,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 14.50%, which implies a selling price of 80, The effective interest method is used to allocate interest expense. 1. Using the implied selling price of 80, what are the issuer's cash proceeds from issuance of these bonds. 2. What total amount of bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid payments of Par value at maturity Total repayments Less amount borrowed (from part 1) Total bond interest expense 3. What amount of bond interest expense is recorded on the first interest payment date? Garcia Company issues 10%, 15-year bonds with a par value of $140,000 and semiannual interest paym ents. On the issue date, the annual market rate for these bonds is 8%, which implies a selling price of 117 14. The effective interest method is used to allocate interest expense. 1. Using the implied selling price of 117 4, what are the issuer's cash proceeds from issuance of these bonds. 2. What total amount of bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid: payments of Par value at maturity Total repayments Less amount borrowed (from part 1) Total bond interest expense 3. What amount of bond interest expense is recorded on the first interest payment date? Problem 14-8AB Effective Interest: Amortization of bond discount LO P1, P5 Legacy issues $740,000 of 7.5%, four-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31, They are issued at $680186 and their market rate is 10% at the issue date. Required: 1. Prepare the January 1,2017, journal entry to record the bonds' issuance. 2. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. 3. Prepare an effective interest amortization table for the bonds' first two years. 4. Prepare the journal entries to record the first two interest payments. Prepare the January 1, 2017, journal entry to record the bonds' issuance View transaction list Journal entry worksheet Record the issue of bonds with a par value of $740,000 cash on January 1, 2017 at an issue price of $680,186 Note: Enter debits before credits. Date General Journal Debit Credit Jan 01, 2017 Record entry Clear entry View general journal Complete the below table to calculate the total bond interest expense to be recognized over the bonds life Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense Prepare an effective interest amortization table for the bonds' first two years. Semiannual Cash Interest Bond Interest Discount Unamortized Expense AmortizationDiscount Carrying Value Interest Period-End 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2018 Paid Prepare the journal entries to record the first two interest payments View transaction list Journal entry worksheet Record the first interest payment on June 30, 2017. Note: Enter debits before credits. Date General Journal Credit Jun 30, 2017 Record entry Clear entry View general journal Prepare the journal entries to record the first two interest payments View transaction list Journal entry worksheet Record the second interest payment on December 31, 2017. Note: Enter debits before credits. Date General Journal Credit Dec 31, 2017 Record entry Clear entry View general journal Problem 14-9AB Effective Interest: Amortization of bond premium; computing bond price LO P1, P6 Ellis issues 9.0%, five-year bonds dated January 1, 2017, with a $410,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $426642. The annual market rate is 8% on the issue date. (Table BI. Table B2 lableB3. and Table BA) (Use appropriate factor(s) from the tables provided.) Required: . Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. 4. Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2019 Compute the total bond interest expense over the bonds life Total bond interest expense over Amount repaid: life of bonds: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense Pr epare an effective interest amortization table for the bonds' life. Semiannual Period- Cash Interest Bond Interest PremiumUnamortized Carrying Valu End 01/01/2017 06/30/2017 2/31/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 Paid Expense Amortization Premium 12/31/2020 06/30/2021 12/31/2021 Total Prepare the journal entries to record the first two interest payments. View transaction list Journal entry worksheet Record the first interest payment on June 30, 2017 Note: Enter debits before credits. Date General Journal Debit Credit Jun 30, 2017 Record entry Clear entry View general journal Prepare the journal entries to record the first two interest payments. View transaction list Journal entry worksheet Record the second interest payment on December 31, 2017. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31, 2017 Record entry Clear entry View general journal Required 1 Required 2 Required 3 Required 4 Use the market rote at ssuance to compute the presant value of the remaining cash nows for these bonds as of December Required 4 present value of the remaining cash flows for these bonds as of December 31, 2019. (Round table values to 4 decimal places, and use rounded values in all calculations.) Table values are based on: Present Cash Flow Par (maturity) value Interest (annuity) Price of bonds Value Amount
