Hi, I need some assistance on this full question. It has 3 parts, thank you! Har
ID: 2500626 • Letter: H
Question
Hi, I need some assistance on this full question. It has 3 parts, thank you!
Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $32,000 par value and an annual contract rate of 12%, 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, 2015.
Prepare the journal entry to record their issuance.
Hartford Research issues bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds have a $32,000 par value and an annual contract rate of 12%, 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
1. Market interest rate = 10%
Table value are based on
N =
i=
20
6%
Cash flow
Table value
Amount
Present value
PAR (maturity) value
0.3769
$32,000
12060.8
Interest (annuity)
12.4622
$1,920
23927.424
Price of bond
35988.224
Date
General journal
Debit
Credit
Jan 01, 2015
Bank
35988.224
12% Bonds
35988.224
2. Market interest rate = 12%
Table value are based on
N =
i=
20
6%
Cash flow
Table value
Amount
Present value
PAR (maturity) value
0.3118
$32,000
9977.6
Interest (annuity)
11.4699
$1,920
22022.208
Price of bond
31999.808
Date
General journal
Debit
Credit
Jan 01, 2015
Bank
32000
12% Bonds
32000
3. Market interest rate = 14%
Table value are based on
N =
i=
20
6%
Cash flow
Table value
Amount
Present value
PAR (maturity) value
0.2594
$32,000
8300.8
Interest (annuity)
10.5940
$1,920
20340.48
Price of bond
28641.28
Date
General journal
Debit
Credit
Jan 01, 2015
Bank
28641.28
12% Bonds
28641.28
Table value are based on
N =
i=
20
6%
Cash flow
Table value
Amount
Present value
PAR (maturity) value
0.3769
$32,000
12060.8
Interest (annuity)
12.4622
$1,920
23927.424
Price of bond
35988.224
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