Next Question Question Help Assume that on March 1, 2018, Allantic Corp, issues

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Next Question Question Help Assume that on March 1, 2018, Allantic Corp, issues 6 percent, 10-year bonds payable with a maturity value of $1,100,000. The bonds pay interest on February 28 ar August 31, and Atilantic amortizes any premium or discount using the straight-line method. Adantic's fiscal year end is December 31 Read the teauirements Requirement 1. If the market interest rabe is 4.5 percent when Aldlantic Corp issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explair. The 6 percent bonds issued when the market interest rate is 4.5 percent will be priced at They are n this market, so investors wil to acquire them DoE Requirement 2.?the market interest rato 75percent when Adartic Corp. issues its bonds, wilgo bonds be priced at par, at a prenum, or at a discount? ExplaiL pant Take The 6 percent bonds issued when the market interest rate is 7.5 pencent will be priced at . They are in this market, so investors wl Requirement 3. Asame Pal lhe issue pricoofthe bonds is $1,133eon, Jarnate each ofthe bonds payable ransactors. ?,nrrard any mimea any jounal entries) Choose from any list or enber any number in the input fields and then continue to the next question but then round all amounts you input into the journal enry tables to the nearest whole dolar Record debits first, then credits. Exclude explanasions fhom 06/22/18 PowerPort Chapter 10 9 3 K. command option ption command

Explanation / Answer

Req 1) Price of the bond = coupon * PVIFA(MR,n) + Par * PVIF(MR,n) 1100000*3% * PVIFA(4.5/2 , 20) + 1100000 * PVIF(4.5/2 , 20) 1100000*3% * 15.9637 + 1100000 * 0.6408 1231682.1 (issued at premium) Req 2) 1100000*3% * PVIFA(7.5/2 , 20) + 1100000 * PVIF(7.5/2 , 20) 1100000*3% * 13.8962 + 1100000 * 0.4789 985364.6 (issued at discount) Req 3) halfyearly amortisation of premium of $33000 = 33000/20 = 1650 Journal Entries: a Debit $ Credit $ Mar 1 2018 Cash 1133000 Bond payable 1100000 Premium on BP 33000 (issuance of bond at premium) b Aug 31 2018 Interest exp 31350 Premium on BP 1650 Cash 33000 (payment of interest on aug 31) c Dec 31 2018 Interest exp 20900 Premium on BP 1100 Interest payable 22000 (payment of interest made due on dec 31) d Feb 28 2019 Interest exp 10450 Premium on BP 550 Interest payable 22000 Cash 33000 (payment of interest on feb 28)

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