Bringham Company issues bonds with a par value of $650,000 on their stated issue

Question

Bringham Company issues bonds with a par value of $650,000 on their stated issue date The bonds re n 5 years and pay 6% annual interest in semiannual payments On the ssue date, the annual maket rate tor the bonds is 8% aaieELL lable B2. Tabo 2. and Table 4) use appropriate factors) from the tables provided.) -What is the amount of each semiannual interest payment for these bonds? How many semiannual interest payments will be made on hese bonds over their e? Use the interest rales given to detemine whether the bonds are ssued at par, at a disoount or at a premium Compute the price of the bonds as oftheir sue date Prepare the journal entry to record the bonds issuance

Explanation / Answer

1] The amount of each semiannual interest payment for these bonds

Answer:

  

Par(Maturity) Value

Semi annual Rate

Semiannual cash Interest Payment

$ 650,000.00

6% P.A

$             19,500.00

2] Number of semiannual interest payments made on their life

Answer: Number of Payments: 10

3] Whether the bonds are issued at par, at a discount or at a premium

Answer: The bonds are issued at par value.

4] Compute the price of the bonds as of their issue date

Answer:

Cash Flow

Table Value

Present Value

Par(Maturity)Value

$650,000

Interest(Annually)

1.3382

$219,830

Price of bonds

$869,830

Interest = Table Value X Bond Value

5] Journal Entry- Record the issue of bonds with par value of $650,000 for cash

Answer:

Debit

Credit

Cash A/c

650,000

8% Bonds

650,000

  

Par(Maturity) Value

Semi annual Rate

Semiannual cash Interest Payment

$ 650,000.00

6% P.A

$             19,500.00

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