Problem 14-1A Computing bond price and recording issuance LO P1 Hartford Researc

Question

Problem 14-1A Computing bond price and recording issuance LO P1 Hartford Research issues bonds dated January 1, 2013, that pay interest semiannually on June-30 and December 31. The bonds have a $34,000 par value and an annual contract rate of 8%, and they mature in 10 years (Table B 1. Table B2. able B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Required Consider each of the tollowing three separate situations The market rate at the date of issuance is 6% (a) Complete the below table to determine the bonds issue price on January 1 2013 Table values are based on

Explanation / Answer

1)

a. n = 20 & i = 3%

Par (Maturity ) Value = 0.744 $34000 25296

interest (annuity) = 8.530 $1360 11600.80

Price of bond = $36896.80

Journal Entries:

Debit Cash $36896.80

Credit Bond Payable $34000

Credit Premium on Bond Payable $2896.80

2)

a. n = 20 & i = 4%

Par (Maturity ) Value = 0.676 $34000 22984

interest (annuity) = 8.111 $1360    11030.96

Price of bond =    $34014.96

Journal Entries:

Debit Cash $34014.96

Credit Bond Payable $34000

Credit Premium on Bond Payable $14.96

3)

a. n = 20 & i = 5%

Par (Maturity ) Value = 0.614 $34000 20876

interest (annuity) = 7.722 $1360    10501.92

Price of bond =    $31377.92

Journal Entries:

Debit Cash $31377.92

Debit   Discount on Bond Payable $2622.08

Credit Bond Payable $34000

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