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s Window Help a ereader.chegg.com piace wnows Media suggested Stes See What's Hot Web Sice Galery Google Apple Disney ESPN 00f Premium Paradise Ka-ker Aenases! One Plece S ose straigntc une oepreciaton ana prepare tne jourmar entry to aepreciane tne easea asser ai the ena or year i Assume zero savage vase and five-year life for the office equipment. PROBLEM SET B Round dollar uts so the et whole doilar. Assume no reversing eres ae Problem 10-18A Computing bond price and seconding issuance C2 P Flagstaff Systems issues bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds have a s90,000 par value and an annual contract rate of 12%, and they mature in five years. Required For each of the following theee separate situations, (a) determise the bonds' issue price on January 1, 2017, and () prepare the joumal entry to recond their issuance. 1, The market rate at the date of issuance is 10% 2. The market rate at the date of issuance is 12% 3. The market rae at the date of issuance is 14% MacBook Air 5 9

Explanation / Answer

(a) If market rate of interest is 10%

Issue price = PV of Coupon amount + Pv of Principal

= 5400*x7.7217 + 90000x0.6139 * 90000*12%*6/12

= 41698 + 55252 = 96950

Cash A/c dr 96950

to 12% Bond Payable 90000

to Premium on Bond 6950

(b) if market rate and coupon rate is same, it means bond value & issue price will be always same

Bond issued at par = $90000

Cash A/c dr 90000

to 12% Bond Payable 90000

(c) If market rate of interest is 14%

Issue price = PV of Coupon amount + Pv of Principal

= 5400*x7.0236 + 90000x0.5083 * 90000*12%*6/12

= 37927 + 45751 =  83678

Cash A/c dr 83678

Discount on Bond 6322

to 12% Bond Payable 90000

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