On February 1, 2016, Cromley Motor Products issued 7% bonds, dated February 1, w
ID: 2456146 • Letter: O
Question
On February 1, 2016, Cromley Motor Products issued 7% bonds, dated February 1, with a face amount of $60 million. The bonds mature on January 31, 2020 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $60,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31
1. Determine the price of the bonds issued on February 1, 2016
2.1 Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2.2 Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturit
Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2016
Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2018
Payment Number Cash Payment Effective Interest Increase in Balance Outstanding Balance 1 2 3Explanation / Answer
On February 1, 2016, Cromley Motor Products issued 7% bonds, dated February 1, w
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