Park Corporation is planning to issue bonds with a face value of $2,300,000 and
ID: 2516962 • Letter: P
Question
Park Corporation is planning to issue bonds with a face value of $2,300,000 and a coupon rate of 10 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required 1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Date General Journal Debit Credit 2,300,000 17 January 01 Cash Premium on bonds payable Bonds payable 2,300,017 2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answer to whole dollars.) Answer is not complete No Date General Journal Debit Credit June 30 Interest expense 97,7510 Cash 97,750 Discount on bonds payableExplanation / Answer
Exercise 1 Journal Date Particulars Debit Credit present value factor for half yearly @ 8.5% Year 1 $ $ 0.959 1 Q1 Jan-01 CASH a/C 2299988.5 0.920 2 premium on bonds payable 11.5 0.883 3 to Bonds payable 2300000 0.847 4 (Being Bonds issued at premium) 0.812 5 Q2 Jun-30 Interest A/c Dr. 97750 0.779 6 To Bank/cash A/c 115000 0.747 7 (Being Interest Due) 0.717 8 0.688 9 notes 0.660 10 1 calculation of value of bonds 0.633 11 (2300000*pvf for year 20 + interest for half year * pvaf total for 20 years) 0.607 12 (2300000*0.435+ 97750*13.294) 0.582 13 2299988.5 0.558 14 0.536 15 2 interest 0.514 16 (2300000*8.5/100*1/2 0.493 17 97750 0.473 18 0.453 19 0.435 20 13.294