On February 1, 2021, Cromley Motor Products issued 8% bonds,dated February 1, with a face amount of $90 million. The bondsmature on January 31, 2025 (4 years). The market yield for bonds ofsimilar risk and maturity was 10%. Interest is paid semiannually onJuly 31 and January 31. Barnwell Industries acquired $90,000 of thebonds as a long-term investment. The fiscal years of both firms endDecember 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)
Required:
1. Determine the price of the bonds issued on February 1,2021.
2-a. Prepare amortization schedules that indicate Cromley’seffective interest expense for each interest period during the termto maturity.
2-b. Prepare amortization schedules that indicate Barnwell’seffective interest revenue for each interest period during the termto maturity.
3. Prepare the journal entries to record the issuance of thebonds by Cromley and Barnwell’s investment on February 1, 2021.
4. Prepare the journal entries by both firms to record allsubsequent events related to the bonds through January 31, 2023
