Park Corporation is planning to issue bonds with a face value of $760,000 and a

Question

Park Corporation is planning to issue bonds with a face value of $760,000 and a coupon rate of 7.5 percent. The bonds mature in 6 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 discount 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 Round your final answer to whole dollars.) 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.) ournal entry worksheet

Explanation / Answer

1) Maturity Value of Bonds :-

Discount = Face Value - Maturity Value

= $760000 - $734679

= $25321

Journal Entry ;-

2) Journal Entry to record interest payment on june 30.

3) Present Value of bond Payable Reported on June 30 in Balance Sheet :-

Amount of Bonds Payable = PV of bonds payable + Amortized value of Discount

= $734679 + $3800

= $738479

Years ($760000*7.5%)/2 PV @ 8.5% PV of Interest ($) 1 $28500 0.95923 27338 2 $28500 0.92013 26224 3 $28500 0.88262 25155 4 $28500 0.84663 24129 5 $28500 0.81212 23145 6 $28500 0.77901 22202 7 $28500 0.74725 21297 8 $28500 0.71679 20429 8 $760000 0.71679 544760 Maturity Value 734679

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