The Bradford Company issued 10% bonds, dated January 1, with a face amount of $8

Question

The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2018 to Saxton- Bose Corporation. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31, EVof$1. PV of $1, PVAof$1. PVA of$1. EVADof$1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. to 3.Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2018 (at the effective rate). (Enter your answers in whole dollars. Round your answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the purchase of the bonds by Saxton-Bose. Note: Enter debits before credits. Date General Journal January 01, 2018 Record entry Clear entry View general journal

Explanation / Answer

The amount paid by Saxton - Bose corporation for the bond = $71,637,459 (price of the bond)

Working:

Face value of the bond 80000000 Coupon rate 10% Semiannual interest 4000000 Market rate 12% Present Value of $1 after 10 years at 12% 0.321973 Present value of annuity of $1 for 20 periods at 6% 11.4699 Present value of the maturity value 25757859 Present value of the semi-annual interest 45879600 Price of the bond 71637459

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