Hartford Research issues bonds dated January 1, 2017, that pay interest semiannu

Question

Hartford Research issues bonds dated January 1, 2017, that pay interest semiannually on Jur bonds have a $22,000 par value and an annual contract rate of 12%, and they mature in 10 Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all tal places, and use the rounded table values in calculations.) Required: Consider each of the following three separate situations. I. The market rate at the date of issuance is 10%. (a) Complete the below table to determine the bonds' issue price on January 1, 2017. (b) Prepare the journal entry to record their issuance 2. The market rate at the date of issuance is 12%. (a) Complete the below table to determine the bonds' issue price on January 1, 2017. (b) Prepare the journal entry to record their issuance 3. The market rate at the date of issuance is 14%. (a) Complete the below table to determine the bonds' issue price on January 1, 2017. (b) Prepare the journal entry to record their issuance

Explanation / Answer

Note :

Present value of bonds with semiannual interest

= Semiannual interest payment * PVIFA (R /2 , n*2) + Maturity value *  PVIF(R /2 , n*2)

where , R/2 = Market rate / 2 , n * 2 = Bonds life * 2

Answer 1 a

Answer 1b

Journal Entry

Answer 2a

Answer 2b

Journal Entry

Answer 3a

Answer 3b

Journal Entry

n = 20 years ( ie 10 years *2) i = 5 % ( ie 10 % / 2) Cash Flow Table Value Amount Present Value Par (maturity) value 0.3769 $22,000 $8,292 Interest payment 12.4622 $1,320 $16,450 Price of Bond $24,742

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