Question

Present Value of $1 PV of Annuity of $1

Issuance of a Bond at Face Value

On January 1, 2017, Whitefeather Industries issued 1,100, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar.

Identify and analyze the effect of the payment of interest on July 1, 2017.

How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

–

Expenses

=

Income

Cash

fill in the blank ee46f1005027040_2

No Entry

fill in the blank ee46f1005027040_4

fill in the blank ee46f1005027040_5

No Entry

fill in the blank ee46f1005027040_7

Interest Expense

fill in the blank ee46f1005027040_9

fill in the blank ee46f1005027040_10

Feedback

Partially correct

4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar.
$fill in the blank 5fff2a0abfb4ff2_1

Answer 1

Solution:

1.

4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar. = $1100*1000*5% = $55000 is the accrued interest on January 31,2017.

Since the market rate and the coupon rate are equal, the bond is issude at par and hence no amortizaion of discount or premium

Hope this helps! In case of any clarifications, kindly use the comment box below