When Patey Pontoons issued 8% bonds on January 1, 2016, with a face amount of $540,000, the
Question:
When Patey Pontoons issued 8% bonds on January 1, 2016, with a face amount of $540,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2019 (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 $1andPVAD of $1)(Use appropriate factor(s) from the tables provided.) |
Required: | |
1. | Determine the price of the bonds at January 1, 2016. |
2. | Prepare the journal entry to record their issuance by Patey on January 1, 2016.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
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, 2016.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
5. | What is the amount(s) related to the bonds that Patey will report in its balance sheet at December 31, 2016? |
6. | What is the amount(s) related to the bonds that Patey will report in its income statement for the year ended December 31, 2016? (Ignore income taxes.) |
7. | Prepare the appropriate journal entries at maturity on December 31,(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |