Question
Problem 14-1 Determining the price of bonds; discount and premium; issuer and investor [LO14-2] On January 1, 2018, Instaform, Inc., issued 14% bonds with a
Problem 14-1 Determining the price of bonds; discount and premium; issuer and investor [LO14-2]
On January 1, 2018, Instaform, Inc., issued 14% bonds with a face amount of $50 million, dated January 1. The bonds mature in 2037 (20 years). The market yield for bonds of similar risk and maturity is 16%. Interest is paid semiannually. (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-a. Determine the price of the bonds at January 1, 2018. 1-b. Prepare the journal entry to record their issuance by Instaform. 2-a. Assume the market rate was 12%. Determine the price of the bonds at January 1, 2018. 2-b. Assume the market rate was 12%. Prepare the journal entry to record their issuance by Instaform. 3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2, prepare the journal entry to record the purchase by Broadcourt.
- Required 1
- Required 2
- Required 3
- Required 4
Determine the price of the bonds at January 1, 2018. (Round your answer to 2 decimal places.)
|
Prepare the journal entry to record the bond issuance by Bishop on January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to 2 decimal places.)
No | Date | General Journal | Debit | Credit |
---|---|---|---|---|
1 | January 01, 2018 | |||
- ecord the interest on June 30, 2018, using the effective interest method.
Note: Enter debits before credits.
|
- Record the interest on December 31, 2018, using the effective interest method.
Note: Enter debits before credits.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started