PROBLEM I On January 2, 2007, Yenn Corporation iss value of $3,000,000 and a sta

Question

PROBLEM I On January 2, 2007, Yenn Corporation iss value of $3,000,000 and a stated interest rate of 8%, payable semiannu ales a The current yield rate on such bonds is 10%. Table va Semiannually on June 30 and Decem Table values are: Present value of 1 for 30 periods at 4% Present value of 1 for 15 periods at 10% Present value of 1 for 30 periods at 5% Present value of 1 for 15 periods at 8% Present value of annuity for 15 periods at 10% Present value of annuity for 15 periods at 8% Present value of annuity for 30 periods at 5% 308 239 231 -315 9.712 Present value of annuity for 30 periods at 4% 17.292 Using the Present Value tables, and the effective Following: (Show all calculations !!!) Required: interest method, determine the 1) The issue price of the bond issue. 2) Record the bond issue on January 2. 3) Record the first interest payment on June 30.

Explanation / Answer

1) Calculate issue price of bonds :

Issue price of bonds = (3000000*4%*15.372+3000000*.231) = 2537640

2) Record Bonds issue on january 2 :

3) Record first interest payment :

date accounts & explanation debit credit Jan 2 Cash a/c 2537640 Discount on bonds payable 462360 Bonds payable a/c 3000000 (To record issuance of bonds payable)

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