Question 1: Question 2: On January 1, Applied Technologies Corporation (ATC) iss

Question

Question 1:

Question 2:

On January 1, Applied Technologies Corporation (ATC) issued $580,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 10 percent. When the bonds were issued, the market interest rate was 10 percent. The bonds pay interest once per year on December 31 Required 1. Determine the price at which the bonds were issued and the amount that ATC received at issuance Amount Received at Issuance 2.&3. Complete the required journal entries to record the bond issuance and the first interest payment on December 31 assuming no interest has been accrued earlier in the year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

Solution 1-1:

Coupon rate of bond = 10%

Market rate of interest at the time of bond issue = 10%

As coupon rate and yield on bond is same, therefore bond will be issued at face value.

Hence

Price at which bond were issued and amount that ATC received = $580,000

Solution 1 - 2&3:

Applied Technology Corporation Journal Entries Date Particulars Debit Credit 1-Jan Cash A/c Dr $580,000.00             To Bonds Payable $580,000.00 (Being bond issued for 10 years maturity at 10% interest rate) 31-Dec Interest Expense Dr ($580,000*10%) $58,000.00             To Cash $58,000.00 (Being interest paid on bond)

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