2 The Bradford Company issued 1 % bonds, dated January t with a face amount of $

Question

2 The Bradford Company issued 1 % bonds, dated January t with a face amount of $80 milion on January t 2018 to Saxton Bose Corporation. The bonds mature on December 31. 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12% Interest is paid semiannually on June 30 and December 31. (EV o S1. PV of S1. EVA of St. PVA of S1. EVAD of $1 and PVAD oft S) (Use 10 ponts Required: 1 to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1. 2018, interest revenue on June 30 2018 and interest revenue on December 31. 2018 (at the effective rate) (Enter your answers in whole dollars. Round your answers to the nearest whole doller If no entry is required for a tr t, select "No journal entry required" in the first account field.) is not n bonds 2018 01 4,000 0000 4,000 000 k Prex 2 or 9 Next > 0 LG

Explanation / Answer

SOLUTION:

Jan-01 Investment in bonds 80,000,000 Discount on bond investment 9,176,320 Cash 70,823,680 Jun-30 Cash 4,000,000 Discount on bond investment 249,421 Interest revenue 4,249,421 (70823680*12%/2) Dec-30 Cash 4,000,000 Discount on bond investment 264,386 Interest revenue 4,264,386 (70823680+ 249421)*12%/2

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