On January 1, 2019, Firm X issued 7% bonds, face value $5,000,000 due at the end of 5 years with interest paid annually

 

Part 1: Assume yield rate is 6%

                                                                                               Yield Rate 6%

Present value of 1 at 6%                                                               .74726

Present value of annuity (5 years 6%)                      4.21236

 

1.      For how many the Bond is sold? ________

2.      What is the amount of premium or discount? __________

3.      Present the calculation the way you have the answer of question 1 and 2.

4.      Present the journal entry for the company that issues the Bonds and for the buyer of the Bonds, at the date of emission.

5.      Use a table of amortization on Excel using Effective Interest Method:

 

6. Prepare the journal entries for the amortization of the Bonds for each year.

 

Part 2: Assume yield rate is 8%

                                                                                               Yield Rate 8%

Present value of 1 at 8%                                                               .68058

Present value of annuity (5 years 8%)                      3.99271

7.  For how many the Bond is sold? ________

8.  What is the amount of premium or discount? __________

9. Present the calculation the way you have the answer of question 7 and 8.

10 Present the journal entry for the company that issues the Bonds and for the buyer of the Bonds, at the date of emission.

11. Use a table of amortization on Excel using Effective Interest Method:

12. Prepare the journal entries for the amortization of the Bonds for each year.