On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The...

   

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On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The bond carries an 8% annual interest rate and pays interests annually. The market interest rate at the time the bonds were issued was 6%. (Round to the nearest dollar) Present Value of $1 Table 6% 7% n 5% 8% 1 0.9524 0.9434 0.9346 0.9259 2 009070 0.8900 0.8734 0.8573 3 0.8638 0.8396 0.8163 0.7938 4 0.8227 0.7921 0.7629 0.7350 5 0.7835 0.7473 0.7130 0.6806 Required: 1) What is the amount of interest payment that the company will pay to the bondholders each year? (2 pts) Present Value of $1 Annuity n 5% 6% 7% 8% 1 0.9524 0.9434 0.9346 0.9259 2 1.8594 1.8334 1.8080 1.7833 3 2.7232 2.6730 2.6243 2.5771 4 3.5460 3.6451 3.3872 3.3121 5 4.3295 4.2124 4.1002 3.9927 2) Calculate the proceeds from the bond issue (i.e., selling price of the bond). (5 pts) 3) Prepare the journal entry for the issuance of the bond on January 1, 2009. (4 pts) 4) What is the amount of interest expense that the company should record on its book for the first year (i.e., year of 2009) and the book value of the bond at December 31, 2009? Prepare the journal entry for the company's first interest payment made on December 31, 2009 under the effective-interest rate method. (9 pts) (a) Interest Expense for 2009 = (b) Book Value of the bond at the end of 2009 = (c) Journal Entry for the first interest payment On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The bond carries an 8% annual interest rate and pays interests annually. The market interest rate at the time the bonds were issued was 6%. (Round to the nearest dollar) Present Value of $1 Table 6% 7% n 5% 8% 1 0.9524 0.9434 0.9346 0.9259 2 009070 0.8900 0.8734 0.8573 3 0.8638 0.8396 0.8163 0.7938 4 0.8227 0.7921 0.7629 0.7350 5 0.7835 0.7473 0.7130 0.6806 Required: 1) What is the amount of interest payment that the company will pay to the bondholders each year? (2 pts) Present Value of $1 Annuity n 5% 6% 7% 8% 1 0.9524 0.9434 0.9346 0.9259 2 1.8594 1.8334 1.8080 1.7833 3 2.7232 2.6730 2.6243 2.5771 4 3.5460 3.6451 3.3872 3.3121 5 4.3295 4.2124 4.1002 3.9927 2) Calculate the proceeds from the bond issue (i.e., selling price of the bond). (5 pts) 3) Prepare the journal entry for the issuance of the bond on January 1, 2009. (4 pts) 4) What is the amount of interest expense that the company should record on its book for the first year (i.e., year of 2009) and the book value of the bond at December 31, 2009? Prepare the journal entry for the company's first interest payment made on December 31, 2009 under the effective-interest rate method. (9 pts) (a) Interest Expense for 2009 = (b) Book Value of the bond at the end of 2009 = (c) Journal Entry for the first interest payment

Answer rating: 100% (QA)

Answer Calculation of issue price of the bonds Annual interest on bonds 1000000x8 80000 PVIF6 5 4212... View the full answer