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Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $22,800,000 of 10-year,...

Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $22,800,000 of 10-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $24,220,703. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

A)

Journalize the entries to record the following:

The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar.

B) Determine the total interest expense for 20Y1. Round to the nearest dollar.

C) Compute the price of $24,220,703 received for the bonds. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount ________________

Present value of the semi-annual interest payments____________

Price received for the bonds_____________
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Answer #1

1) Journal entry

Date General Journal Debit Credit
July 1 Cash 24220703
Bonds payable 22800000
Premium on bonds payable 1420703

2) Interest payment = 22800000*11%*6/12 = 1254000

Amortization = 1420703/20 = 71035

Date General Journal Debit Credit
Dec 31 Interest expense 1182965
Premium on bonds payable 71035
Cash 1254000

3) Interest expense first year = 1182965

4) Present value of the face amount = (22800000*0.37689) = 8593092

Present value of the semi annual interest payment = 1254000*12.46221 = 15627611

Price received for the bonds = 24220703

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