On January 1, 2019, Firm X issued 7% bonds, face value $5,000,000 due at the end of
Question:
On January 1, 2019, Firm X issued 7% bonds, face value $5,000,000 due at the end of 5 years with interest paid annually
Part 1: Assume yield rate is 6%
Yield Rate 6%
Present value of 1 at 6% .74726
Present value of annuity (5 years 6%) 4.21236
1. For how many the Bond is sold? ________
2. What is the amount of premium or discount? __________
3. Present the calculation the way you have the answer of question 1 and 2.
4. Present the journal entry for the company that issues the Bonds and for the buyer of the Bonds, at the date of emission.
5. Use a table of amortization on Excel using Effective Interest Method:
6. Prepare the journal entries for the amortization of the Bonds for each year.
Part 2: Assume yield rate is 8%
Yield Rate 8%
Present value of 1 at 8% .68058
Present value of annuity (5 years 8%) 3.99271
7. For how many the Bond is sold? ________
8. What is the amount of premium or discount? __________
9. Present the calculation the way you have the answer of question 7 and 8.
10 Present the journal entry for the company that issues the Bonds and for the buyer of the Bonds, at the date of emission.
11. Use a table of amortization on Excel using Effective Interest Method:
12. Prepare the journal entries for the amortization of the Bonds for each year.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill