When Patey Pontoons issued 10% bonds on January 1, 2018, with a face amount of $880,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2021 (4 years). Interest is paid semiannually on June 30 and December 31. (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. Determine the price of the bonds at January 1, 2018. 2. Prepare the journal entry to record their issuance by Patey on January 1, 2018. 3. Prepare an amortization schedule that determines interest at the effective rate each period. 4. Prepare the journal entry to record interest on June 30, 2018. 5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2018? 6. What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2018? (Ignore income taxes.) 7. Prepare the appropriate journal entries at maturity on December 31, 2021.

Req 1

Req 2

Req 3

Req 4

Req 5 and 6

Req 7

Determine the price of the bonds at January 1, 2018. (Round final answers to the nearest whole dollar.)

8

Table values are based on:
n =	8
i =	5.5%
Cash Flow	Amount	Present Value
Interest
Principal
Price of bonds

Prepare the journal entry to record their issuance by Patey on January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollar.)

Journal entry worksheet

Record the issuance of the bonds on January 1, 2018.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
January 01, 2018

Prepare an amortization schedule that determines interest at the effective rate each period. (Round final answers to the nearest whole dollar.)

Semiannual Interest Period-End	Cash Interest	Bond Interest Expense	Discount Amortization	Carrying Value
01/01/2018
06/30/2018
12/31/2018
06/30/2019
12/31/2019
06/30/2020
12/31/2020
06/30/2021
12/31/2021
Total

Prepare the journal entry to record interest on June 30, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollar.)

Journal entry worksheet

Record the interest expense on June 30, 2018.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
June 30, 2018

What is the amount(s) related to the bonds that Patey will report in its balance sheet at December 31, 2018 and income statement for the year ended December 31, 2018? (Ignore income taxes.) (Round your intermediate calculation to nearest whole dollar.)

5. December 31, 2018 book value
6. Interest expense for 2018

Prepare the appropriate journal entries at maturity on December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollar.)

Journal entry worksheet

Record the interest expense on December 31, 2021.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
December 31, 2021

Record the retirement of the bond at maturity on December 31, 2021.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
December 31, 2021