Problem 10-1A Computing bond price and recording issuance LO P1 Hartford Researc

Question

Problem 10-1A Computing bond price and recording issuance LO P1

Hartford Research issues bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds have a $30,000 par value and an annual contract rate of 10%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.)

  

  

  

Complete the below table to determine the bonds' issue price on January 1, 2013.

Table values are based on: n=      i=

Cash flow                             Table Value    Amount      Present Value

Par (maturity) value

Interest

Price of bonds

(b) Prepare the journal entry to record their issuance.

Record the issue of bonds with a par value of $30,000 cash on January 1, 2013. Assume that the market rate of interest at the date of issue is 8%.

2. The market rate at the date of issuance is 10%.

(a) Complete teh below table to determine the bonds' issue price on January 1, 2013.

Table values are based on: n=      i=

Cash flow                             Table Value    Amount      Present Value

Par (maturity) value

Interest

Price of bonds

(b) Prepare the journal entry to record their issuance.

Record teh issue of bonds with a par value of $30000 cash on January 1, 2013. Assume that the market rate of interest at the date of issue is 10%.

Hartford Research issues bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds have a $30,000 par value and an annual contract rate of 10%, and they mature in 10 years. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.)

Explanation / Answer

Solution:-(1)- a The market rate at the date of issuance is 8%. and the Table values are based on half the annual market rate

1-b Journal entry

Cash Account Dr 32447
To Premium on Bonds Payable A/c 2447
To Bonds Payable 30,000

2-a The market rate at the date of issuance is 10% and theTable values are based on half the annual market rate

2-b Journal entry

Cash Account Dr 30,003
To Premium on Bonds Payable A/c 3
To Bonds Payable 30,000

Cash Flow Table value@4% Amount Present value Par Value 0.676 30,000 20280 Interest (Annuity) 8.111 1500 12167 Price of bond 32447 Bond premium 2447

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