Reporting Financial Statement Effects of Bond Transactions On January 1, 2013, McKeown, Inc., issued $250,000 of 8%, 9-year bonds for $220,776, yielding a market (yield) rate of 10%. Semiannual interest is payable on June 30 and December 31 of each year. Required a. Show computations to confirm the bond issue price. (Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.) Present value of principal repayment $ Answer Correct Present value of interest payments $ Answer Correct Selling price of bonds $ Answer Correct b. Prepare journal entries to record the bond issuance, semiannual interest payment and discount amortization on June 30, 2013, and semiannual interest payment and discount amortization on December 31, 2013. Use the effective interest rate. (Round your answers to the nearest dollar.) General Journal Date Description Debit Credit 01/01/13 Cash Answer Correct Answer Correct Answer Correct Answer Correct Answer Correct Answer Correct Answer Correct Answer Correct 6/30/13 Answer Correct Answer Incorrect Answer Correct Answer Incorrect Answer Correct Answer Incorrect Cash Answer Correct Answer Correct 12/31/13 Answer Correct Answer Incorrect Answer Correct Answer Incorrect Answer Correct Answer Incorrect Cash Answer Correct Answer Correct c. Post the journal entries from part b to their respective T-accounts. Cash (A) 01/01/13 Answer Correct Answer Correct 06/30/13 Answer Correct Answer Correct 12/31/13 Answer Correct Answer Correct Bonds Payable (L) 01/01/13 Answer Correct Answer Incorrect 06/30/13 Answer Correct Answer Incorrect 12/31/13 Answer Incorrect Answer Correct Interest Expense (E) 01/01/13 Answer Incorrect Answer Correct 06/30/13 Answer Incorrect Answer Correct 12/31/13 Answer Incorrect Answer Incorrect Bond Discount (XL) 01/01/13 Answer Correct Answer Correct 06/30/13 Answer Correct Answer Incorrect 12/31/13 Answer Correct Answer Incorrect d. Record each of the transactions from part b in the financial statement effects template. Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities - Contra-Liabilities + Contrib. Capital + Earned Capital 1/1/13 Issue bonds at a discount $ Answer Correct + $ Answer Correct = $ Answer Correct - $ Answer Correct + $ Answer Correct + $ Answer Correct 6/30/13 Interest payment on bonds Answer Correct + Answer Correct = Answer Correct - $ Answer Incorrect + Answer Correct + Answer Incorrect 12/31/13 Interest payment on bonds Answer Correct + Answer Correct = Answer Correct - $ Answer Incorrect + Answer Correct + Answer Incorrect Income Statement Revenue - Expenses = Net Income $ Answer Correct - $ Answer Correct = $ Answer Correct Answer Correct - Answer Incorrect = Answer Incorrect Answer Correct - Answer Incorrect = Answer Incorrect