When Patey Pontoons issued 8% bonds on January 1, 2013, with a face amount of $620,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2016 (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, 2013.

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

2.

Prepare the journal entry to record their issuance by Patey on January 1, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
January 01, 2013	Cash
	Discount on Bonds payable
	Bonds payable

3.

Prepare an amortization schedule that determines interest at the effective rate each period.

Semiannual Interest Period-End	Cash Interest	Bond Interest Expense	Discount Amortization	Carrying Value
01/01/2013
06/30/2013
12/31/2013
06/30/2014
12/31/2014
06/30/2015
12/31/2015
06/30/2016
12/31/2016
Total

4.

Prepare the journal entry to record interest on June 30, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
June 30, 2013	Interest expense
	Discount on bonds payable
	Cash

5.

What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2013?

Interest expense for 2013

6.

What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2013? (Ignore income taxes.)

Interest expense for 2013

7.

Prepare the appropriate journal entries at maturity on December 31,2016. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
December 31, 2016	bonds payable
	cash
December 31,2016	Bonds payable
	Cash