Manrow Corp is trying to raise capital in order to finance its new Jet Ski produ

Question

Manrow Corp is trying to raise capital in order to finance its new Jet Ski production divisoin by issuing bonds. On January 1, 2012 Manrow Corp issues a $200,000 8 year, 16% bond that pays interest quarterly. The current market interst rate is 12% and Manrow Corp amortizes any discounts or premiums using the effective interest method of amortization.

1. Prepare the Journal entry to record the issuance of the bond on January 1, 2012.

2. Prepare the Journal entry to record interest expense on December 31, 2013

Round all calcuations up to the next whole dollar.

Explanation / Answer

1. Prepare the Journal entry to record the issuance of the bond on January 1, 2012.

2. Prepare the Journal entry to record interest expense on December 31, 2013

Journa entry will be

Face Value $2,00,000 Period $8 year Interest Quarterly Interest rate 16% Market rate 12% PV Factor Present Value of Principal $77,667 0.38834 Present Value of Interest $1,63,110 20.38877       Issue Price of Bonds Payable $2,40,778

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.