Question

Analyzing and Reporting Financial Statement Effects of Bond Transactions
On January 1, 2012, Trueman Corporation issued $900,000 of 20-year, 11% bonds for $832,292, yielding a market (yield) rate of 12%. Interest is payable semiannually on June 30 and December 31.

(a) Confirm the bond issue price.

Round answers to the nearest whole number.

Present value of principal repayment	$Answer
Present value of interest payments	$Answer
Selling price of bonds	$ 832,292

(b) Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and discount amortization on June 30, 2012, and (3) semiannual interest payment and discount amortization on December 31, 2012.

Round answers to the nearest whole number. Use negative signs with answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
(1)	Answer		Answer		Answer		Answer		Answer
(2)	Answer		Answer		Answer		Answer		Answer
(3)	Answer		Answer		Answer		Answer		Answer

Income Statement
Revenue	-	Expenses	=	Net Income
Answer		Answer		Answer
Answer		Answer		Answer
Answer		Answer		Answer

Answer 1

	Amount	PV factor 12%/2, period 40	Present Value
Present value of principal repayment	900000	0.0972	87,500
Present value of interest payments (900000*11%/2)	49500	15.0463	744,792
Selling price of bonds			832,292

2

	Balance Sheet
Transaction	Cash Asset	Non cash Assets	Liabilities	Contributed Capital	Earned Capital
1	$832,292.00		$832,292.00
2	-49500	-438			49938
3	-49500	-464			49964

Income Statement
Revenue	Expenses	Net Income
0	0	0
0	49938	-49,938
0	49964	-49,964