Dantonio Company issued five-year, 7% bonds with a total face value of $920,000
ID: 2467847 • Letter: D
Question
Dantonio Company issued five-year, 7% bonds with a total face value of $920,000 on January 1,2014. Interest is paid semi-annually on June 30 and December 31. The market rate of interest on this date was 6%. Dantonio uses the effective interest rate method. Required: Determine the proceeds of the bond sale on 1/1/15. Explain your method of calculation. Did this bond sell at a premium or discount? In 1-2 sentences explain why it sold at a premium or discount. Using Excel, prepare a five-year bond amortization schedule for these bonds. There are examples in your notes and posted on D2L. Use formulas and reference cells in Excel to show how you calculate your numbers. Prepare journal entries to record (1) the sale of the bonds on January 1, 2015, (2) the interest payment for the period ended December 30, 2015 and, (3) the final interest and face value payment at maturity on December 31, 2019. Show how the balance sheet would report the bond liability and related premium/discount on December 31, 2016Explanation / Answer
Answer:1
Bond Price=$32200*PVIFA(3%,10)+$920000*PVIF(3%,10)
=$274672.44+$684566.40
=$959239
Answer:2 the bond is sold at premium because proceeds are higher than face value.
Answer:3
Answer:4
(1) cash A/C Dr. $959239
To Bonds payable A/C $920000
To Premium on bonds payable A/C $39239
Year Interest Payment Interest expense Premium amortized Unamortized premium Carrying value 0 39239 959239 1 32200 28777 3423 35816 955816 2 32200 28674 3526 32290 952290 3 32200 28569 3631 28659 948659 4 32200 28460 3740 24919 944919 5 32200 28348 3852 21067 941067 6 32200 28232 3968 17099 937099 7 32200 28113 4087 13011 933011 8 32200 27990 4210 8802 928802 9 32200 27864 4336 4466 924466 10 32200 27734 4466 0 920000Related Questions
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