Reporting Financial Statement Effects of Bond Transactions On January 1, 2016, M

Question

Reporting Financial Statement Effects of Bond Transactions

On January 1, 2016, McKeown, Inc., issued $350,000 of 12%, 9-year bonds for $314,792, yielding a market (yield) rate of 14%. Semiannual interest is payable on June 30 and December 31 of each year.

Required
a. Show computations to confirm the bond issue price.
(Use a calculator or Excel for your calculations. Round your answers to the nearest dollar.)

b. Record the bond issuance, semi-annual interest payment and discount amortization on June 30, 2016 and the semi-annual interest payment and bond amortization on December 31, 2016 in the financial statement effects template.

Present value of principal repayment $Answer Present value of interest payments $Answer Selling price of bonds $Answer

Explanation / Answer

a.

Working:

*Interest payment = $350000 x 12% x 1/2 = $21000

b.

Present value of principal repayment 103551 Present value of interest payments 211241 Selling price of bonds 314792

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