Question

On January 1, 2018, Bradley Recreational Products issued
$200,000, 9%, four-year bonds. Interest is paid semiannually on
June 30 and December 31. The bonds were issued at $193,537 to yield
an annual return of 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) **(Use appropriate factor(s) from
the tables provided.)**

**
Required:
1.** Prepare an amortization schedule that determines
interest at the effective interest rate.

Answer #1

**Solution 1:**

Bond
Amortization Schedule - Bradely Recreation products - Effective
Interest method |
|||||

Period |
Cash Paid |
Interest Expense |
Discount Amortized |
Unamortized discount |
Carrying Value |

1-Jan-18 | $6,463 | $193,537 | |||

30-Jun-18 | $9,000 | $9,677 | $677 | $5,786 | $194,214 |

31-Dec-18 | $9,000 | $9,711 | $711 | $5,075 | $194,925 |

30-Jun-19 | $9,000 | $9,746 | $746 | $4,329 | $195,671 |

31-Dec-19 | $9,000 | $9,784 | $784 | $3,546 | $196,454 |

30-Jun-20 | $9,000 | $9,823 | $823 | $2,723 | $197,277 |

31-Dec-20 | $9,000 | $9,864 | $864 | $1,859 | $198,141 |

30-Jun-21 | $9,000 | $9,907 | $907 | $952 | $199,048 |

31-Dec-21 | $9,000 | $9,952 | $952 | $0 | $200,000 |

**Solution 2:**

Bond
Amortization Schedule - Bradely Recreation products - Straight line
method |
|||||

Period |
Cash Paid |
Interest Expense |
Discount Amortized |
Unamortized discount |
Carrying Value |

1-Jan-18 | $6,463 | $193,537 | |||

30-Jun-18 | $9,000 | $9,808 | $808 | $5,655 | $194,345 |

31-Dec-18 | $9,000 | $9,808 | $808 | $4,847 | $195,153 |

30-Jun-19 | $9,000 | $9,808 | $808 | $4,039 | $195,961 |

31-Dec-19 | $9,000 | $9,808 | $808 | $3,232 | $196,769 |

30-Jun-20 | $9,000 | $9,808 | $808 | $2,424 | $197,576 |

31-Dec-20 | $9,000 | $9,808 | $808 | $1,616 | $198,384 |

30-Jun-21 | $9,000 | $9,808 | $808 | $808 | $199,192 |

31-Dec-21 | $9,000 | $9,808 | $808 | $0 | $200,000 |

**Solution 3:**

Journal
Entries - Bradely Recreation products |
|||

Date |
Particulars |
Debit |
Credit |

Effective interest method: |
|||

30-Jun-20 | Interest Expense Dr | $9,823.00 | |

To Cash | $9,000.00 | ||

To Discount on bond payable | $823.00 | ||

(Being interest paid and discount amortized) | |||

Straight Line Method: |
|||

30-Jun-20 | Interest Expense Dr | $9,808.00 | |

To Cash | $9,000.00 | ||

To Discount on bond payable | $808.00 | ||

(Being interest paid and discount amortized) |

**Solution 5:**

If market rate is still 10% then price would be paid by second investor to first investor on June 30, 2020 =

Carrying value of bond on June 30, 2020 under effective interest method * Face value of bond purchase / Total face value of bond

$197,277 * $20,000 / $200,000 = $19,727.70

When Patey Pontoons issued 10% bonds on January 1, 2018, with a
face amount of $560,000, the market yield for bonds of similar risk
and maturity was 11%. The bonds mature December 31, 2021 (4 years).
Interest is paid semiannually on June 30 and December 31. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.) Q.6 - What is the
interest expense for...

On January 1, 2021, Anne Teak Furniture issued $100,000 of 12%
bonds, dated January 1. Interest is payable semiannually on June 30
and December 31. The bonds mature in 4 years. The annual market
rate for bonds of similar risk and maturity is 14%. What was the
issue price of the bonds? (FV of $1, PV of $1, FVA of $1, PVA of
$1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the
tables provided.)
a. $89,460...

On January 1, 2018, Bishop Company issued 8% bonds dated January
1, 2018, with a face amount of $21.0 million. The bonds mature in
2027 (10 years). For bonds of similar risk and maturity, the market
yield is 10%. Interest is paid semiannually on June 30 and December
31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD
of $1) (Use appropriate factor(s) from the tables provided.
Round your intermediate calculations to...

On January 1, 2018, Darnell Window and Pane issued $18.1 million
of 10-year, zero-coupon bonds for $6,978,334. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
2. Determine the effective rate of interest.
1. & 3. to 5. Prepare the necessary journal
entries.

On January 1, 2018, Shirley Corporation purchased 12% bonds
dated January 1, 2018, with a face amount of $19 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 16%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.) Required: Determine the price of...

On January 1, 2018, Rare Bird Ltd. purchased 15% bonds dated
January 1, 2018, with a face amount of $34 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 11%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.)
Required: Determine the price...

The Bradford Company issued 12% bonds, dated January 1, with a
face amount of $96 million on January 1, 2021. The bonds mature on
December 31, 2030 (10 years). For bonds of similar risk and
maturity, the market yield is 14%. Interest is paid semiannually on
June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the
tables provided.) Required: 1. Determine...

On January 1, 2018, Darnell Window and Pane issued $18.7 million
of 10-year, zero-coupon bonds for $7,209,660. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)

On January 1, 2018, Shirley Corporation purchased 10% bonds
dated January 1, 2018, with a face amount of $13 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided.)
Required: Determine the price of...

On June 30, 2018, Singleton Computers issued 8% stated rate
bonds with a face amount of $100 million. The bonds mature on June
30, 2033 (15 years). The market rate of interest for similar bond
issues was 6% (3.0% semiannual rate). Interest is paid semiannually
(4.0%) on June 30 and December 31, beginning on December 31, 2018.
(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of
$1) (Use appropriate factor(s) from...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 23 minutes ago

asked 27 minutes ago

asked 31 minutes ago

asked 35 minutes ago

asked 37 minutes ago

asked 38 minutes ago

asked 38 minutes ago

asked 38 minutes ago

asked 45 minutes ago

asked 45 minutes ago

asked 54 minutes ago

asked 1 hour ago