On January 1, 2018, Ellison Co. issued 9 year bonds with a face
value of $250,000,000...
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Accounting
On January 1, 2018, Ellison Co. issued 9 year bonds with a facevalue of $250,000,000 and a stated interest rate of 7.5%, payablesemiannually on July 1 and January 1. The bonds were sold to yield8%.
a. The issue price of the bonds is
b. Record the issuance on January 1, 2018.
c. Prepare the journal entries for the interest expense andpayments for 2018, 2019, 2020, 2021 and 2022.
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All working forms part of the answer Working Annual Rate Applicable rate Market Rate 80 40 Coupon Rate 75 375 Face Value 25000000000 Term in years 9 Total no of interest payments 18 Bond Face Value Market Interest rate applicable for periodterm PV of 25000000000 at 40 Interest rate for 18 term payments PV of 1 0493628121 PV of 25000000000 25000000000 x 0493628121 12340703025 A Interest payable per term at 375 on 25000000000 Interest payable per term 937500000 PVAF of 1 for 400 Interest rate for 18 term payments PVAF of 1 1265929697 PV of Interest payments 937500000 x 1265929697 11868090914 B Bond Value AB 24208793939 Requirement a Bonds issue
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