The present value tables can be accessed on google. On January 1, 2018, Darnell
ID: 2529176 • Letter: T
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The present value tables can be accessed on google.
On January 1, 2018, Darnell Window and Pane issued $18.9 million of 10-year, zero-coupon bonds for $7,286,768. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 2. Determine the effective rate of interest. 1. & 3. to 5. Prepare the necessary journal entries. Complete this question by entering your answers in the tabs below. Interest rate General Journal Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermedaite calculation and final answers to nearest whole dollar.) No General Journal Debit Credit Date January 01, 2018 Cash Discount on bonds payable Bonds payable December 31, 2018 Interest expense Discount on bonds payable • December 31, 2019 Interest expense • • Discount on bonds payable December 31, 2027 Bonds payable Cash .Explanation / Answer
Requirement Effective Interest rate on this note is 10% arrived by calculation given below Steps to find effective interest rate Divide 7286768 by 18900000 to get 0.385543 Look for this value in PVIF table at 10 years to find effective interest rate Present value interest factor of (7286768/18900000) at 10 years with 10% Interest in PVIF table is 0.38554328 OR Divide 18900000 by 7286768 to get 2.59374 Look for this value in PVIF table at 10 years to find effective interest rate Future Value interest factor of (18900000/7286768) at 10 years with 10% Interest in FVIF table is 2.593742521 Requirement Amount in $ Date General Journal Debit Credit January 01, 2018 Cash 7286768 Discount on Bonds Payable 11613232 Bonds payable 18900000 December 31, 2018 Interest Expense 728676.8 Discount on Bonds Payable 728676.8 December 31, 2019 Interest Expense 801544.48 Discount on Bonds Payable 801544.48 December 31, 2027 Bonds payable 18900000 Cash 18900000 Year Interest =Previous B*10% Bonds payable minus discount on bonds-B 0 0 7286768 1 728676.8 8015444.8 2 801544.5 8816989.28 3 881698.9 9698688.208 4 969868.8 10668557.03 5 1066856 11735412.73 6 1173541 12908954 7 1290895 14199849.41 8 1419985 15619834.35 9 1561983 17181817.78 10 1718182 18900000
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