Reporting Financial Statement Effects of Bond Transactions
On January 1, 2016, McKeown, Inc., issued $300,000 of 6%, 9-year bonds for $262,023, yielding a market (yield) rate of 8%. Semiannual interest is payable on June 30 and December 31 of each year.
Required
a. Show computations to confirm the bond issue price.
(Use a calculator or Excel for your calculations. Round your
answers to the nearest dollar.)
Present value of principal repayment | $Answer |
Present value of interest payments | $Answer |
Selling price of bonds | $Answer |
b. Record the bond issuance, semi-annual interest payment and discount amortization on June 30, 2016 and the semi-annual interest payment and bond amortization on December 31, 2016 in the financial statement effects template.
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a. Show computations to confirm the bond issue price. | ||||
Present Value of Principal Repayment: | ||||
Principal Repayment | 300000 | A | ||
PVF (18n,4%) | 0.4936281 | B | ||
Present Value of Principal Repayment | 148088 | A*B | ||
Present Value of Interest Payment: | ||||
Interest Payment (300000*3%) | 9000 | C | ||
PVAF(18n,4%) | 12.659297 | D | ||
Present Value of Interest Payment | 113934 | C*D | ||
Selling Price of Bond | 262023 |
Cash Asset | non Cash Asset | Liabilities | Contra Liabilties | Cont Capital | Earned Cap | Revenue | Expense | Net Income | |
1/1/16 Issuance | 262023 | 300000 | -37977 | ||||||
6/30/16 Interest Payment | -9000 | 1481 | -10481 | 10481 | -10481 | ||||
12/31/16 Interest Payment | -9000 | 1540 | -10540 | 10540 | -10540 |
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