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1) Determine the price of a $1 million bond issue under each of the following independent...

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Accounting

1) Determine the price of a $1 million bond issue under each ofthe following independent assumptions:

MaturityInterest paidStated rateEffective (market) rate
110 yearsAnnually10%12%
210 yearsSemiannually10%12%
3
10 years
Semiannually (July 1 and January1)12%10%
4
20 years
Semiannually12%10%
520 yearsSemiannually12%12%

2) Prepare journal entries to record the issuance for each ofthe following the above independent assumptions

3) Only for Assumption 1 and 2, prepare an amortization schedulethat determines interest at the effective rate.

Answer & Explanation Solved by verified expert
4.2 Ratings (800 Votes)
Part 1 Part 2 Case 1 FV 1000000 Journal entry PMT 100000 1000000 x 10 Cash 88699554 Rate 12 Discount on bonds payable 11300446 NPER 10 Bonds payable 100000000 PV 88699554 Being bond issued at discount PV12101000001000000 Case 2 FV 1000000 Journal entry PMT 50000 1000000 x 102 Cash 88530079 Rate 6 122 Discount on bonds payable 11469921 NPER 20 10 x 2 Bonds payable 100000000 PV 88530079 Being bond issued at discount PV620500001000000 Case 3 FV 1000000 Journal entry PMT 60000 1000000 x 122 Cash    See Answer
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