P12AB-38A Determining the present value of bonds payable and journalizing using
ID: 2511783 • Letter: P
Question
P12AB-38A Determining the present value of bonds payable and journalizing using the effective-interest amortization method Relaxation, Inc. is authorized to issue 7%, 10-year bonds payable. On January 1, 2018, when the market interest rate is 12%, the company issues $300,000 of the bonds. The bonds pay interest semiannually. Requirements 1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.) through the first two interest payments. (Round to the nearest dollar.) payments of the semiannual interest amount and amortization of the bonds on 2. Prepare an amortization table for the bond using the effective-interest method, 3. Journalize the issuance of the bonds on January 1,2018, and the finst and secomd June 30, 2018, and December 31, 2018. Explanations are not required.Explanation / Answer
Answer 1:
Bond will be recorded at present value of interest outflows & face value redemption
Hence Bond will be recorded at 2,13,976
Answer 2
Bond amortisation schedule
Answer 3
Date Cash Outflow PVIF PV of Cash Flows 30-06-2018 10,500 0.9434 9,906 31-12-2018 10,500 0.8900 9,345 30-06-2019 10,500 0.8396 8,816 31-12-2019 10,500 0.7921 8,317 30-06-2020 10,500 0.7473 7,846 31-12-2020 10,500 0.7050 7,402 30-06-2021 10,500 0.6651 6,983 31-12-2021 10,500 0.6274 6,588 30-06-2022 10,500 0.5919 6,215 31-12-2022 10,500 0.5584 5,863 30-06-2023 10,500 0.5268 5,531 31-12-2023 10,500 0.4970 5,218 30-06-2024 10,500 0.4688 4,923 31-12-2024 10,500 0.4423 4,644 30-06-2025 10,500 0.4173 4,381 31-12-2025 10,500 0.3936 4,133 30-06-2026 10,500 0.3714 3,899 31-12-2026 10,500 0.3503 3,679 30-06-2027 10,500 0.3305 3,470 31-12-2027 3,10,500 0.3118 96,815 Total 2,13,976Related Questions
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