On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $53
ID: 2338382 • Letter: O
Question
On January 1, 2018, Instaform, Inc., issued 10% bonds with a face amount of $53 million, dated January 1 The bonds mature in 2037 (20 years The market yield for bonds of similar risk and maturity is 12%. Interest is paid semiannually yo 1 pyo 1 FVAo PVA of St, FVAD of $1 and PVAD of $) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Determine the price of the bonds at January 1, 2018. 1-b. Prepare the journal entry to record their issuance by Instaform. 2-a. Assume the market rte was 9%. Determine the price of the bonds at January 1, 2018. 2-b. Assume the market rate was 9%. Prepare the journal entry to record their issuance by Instaform. 3. Assume Broadcourt Electronics purchased the entire issue in a private placement of the bonds. Using the data in requirement 2 prepare the journal entry to record the purchase by Broadcourt Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 2A Req 2B Req 3 Determine the price of the bonds at January 1, 2018. (Enter your answer in whole dollars.) of the bonds Req 1B
Explanation / Answer
5%*53000000 1-a Interest $2,650,000 15.0463 $39,872,695 Principal $53,000,000 0.09722 $5,152,660 Present Value of the bond is $45,025,355 Present Value of an ordinary annuity of $1 :n=40 ,i=6% 1-b Cash $45,025,355 Discount on Bond (Diff) $7,974,645 To Bonds Payable(face amount) $53,000,000 2-a Present value of an ordinary annuity of $1 :n-40 ,i=4.5% 4.5% * 53000000 Interest $2,385,000 18.40158 $43,887,768.30 Principal $53,000,000 0.17193 $9,112,290.00 $53,000,058.30 2-b cash $53,000,058.30 To Bonds Payable (face amount) $53,000,000 To Premium on Bond(Diff) $58.30 3 Investment in Bonds-Face Amount $53,000,000 Premium on Bonds Investment $58.30 To cash $53,000,058.30