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Patrick Corporation issued 5% bonds on January 1, 2018, with a face amount of $1,000,000, the market...

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Accounting

Patrick Corporationissued 5% bonds on January 1, 2018, with a face amount of$1,000,000, the market rate for bonds of similar risk and maturitywas 4%. The bonds mature in 20 years and pay interest semi­annually on June 30 and December 31.

Create an Excel spreadsheet toanswer the following requirements and submit a printout of yourExcel formulas as well as a handwritten copy of your solutions tothe requirements listed below.

Required:

  1. Determine the price of the bonds at January 1, 2018.
  2. Prepare the journal entry to record the issuance of the bondson January 1, 2018.
  3. Prepare a complete amortization schedule that determinesinterest at the effective rate each period using the format listedbelow:

Amortization Schedule

Date      CashInterest    Effective Interest   Decrease in Balance   Outstanding Balance

  1. Prepare the journal entry to record interest on June 30,2018.
  2. Prepare the appropriate journal entry when the bonds mature in20 years.

Answer & Explanation Solved by verified expert
4.3 Ratings (670 Votes)
Solution 1Computation of bond priceTable values are based onn40i2Cash flowTable ValueAmountPresent ValuePar Maturity Value0452890100000000452890Interest Annuity273554802500000683887Price of bonds1136777Solution 2Journal EntriesDateParticularsDebitCredit1Jan18Cash Dr113677700 To Bond Payable100000000 To Premium on BondPayable13677700To record issue of bond at premiumsolution 3Bond    See Answer
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