Situation: On January 1, 2015, Loyola Enterprises issued 10% bonds with a face value of $1,000,000 when the market rate was 8%. The bonds are due in 5 years, and interest is payable June 30 and December 31. Note: Nothing is required by the student for this section (use this information in Section 3).

Concepts: During 2015, Loyola had several transactions that affected some or all of the following balance sheet accounts:

a. Bond discounts

b. Bond premium

c. Bond payable

d. Common stock

e. Additional paid-in capital

f. Retained earnings

2. For each of the following situations, determine whether the transactions Increased (I), Decreased (D), or had No Effect (NE) for each of the items in the chart below. Please use letters (I, D, NE) in the spaces below.

		Bond Discount	Bond Premium	Bond Payable	Common Stock	Addl PIC	Retained Earnings
1.	Loyola issued bonds payable with a nominal interest rate that was less than the market rate of interest.
2.	Loyola called a bond at 102 when the carrying value of the bond was 104.
3.	Loyola issued bonds payable with a nominal interest rate that was greater than the market rate of interest.
4.	Loyola redeemed a 10% bond issue (originally sold at face value) via an open market purchase when the market rate of interest had increased to 14%.
5.	Loyola converted $400,000 bonds payable that were carried at 91 into 4000 shares of its own common stock. The stock has a $1 par value and a current selling price of $100. Use the book value method to record the conversion.

3. Bond Valuation: Use your personal present value tables to calculate the selling price of the bond issue described in the above Situation component(from number 1). Complete the following table with the relevant information:

Cash Flows (Identify each below)	Effective Rate	Periods (n)	Table Factor	Present Value
$
$
Selling Price =	xxxxxxxxxxxxxxxx	xxxxxxxxxxxxxxxxx	xxxxxxxxxxxxxxxxx

4.Amortization Table: Complete the following amortization table based upon your calculation above.

Date	Interest Paid	Interest Expense	Amortized Disc/Prem	Carrying Value
1/1/15	xxxxxxxxxxxxxxxxxx	xxxxxxxxxxxxxxxxxx	xxxxxxxxxxxxxxxxxxx
6/30/15
12/31/15

5. Journal Entries: Prepare the journal entries for the above bond issue on the dates shown below:

Date	Account Name	Debit	Credit
1/1/2015
6/30/2015