Park Corporation is planning to issue bonds with a face value of $710,000 and a
ID: 2576446 • Letter: P
Question
Park Corporation is planning to issue bonds with a face value of $710,000 and a coupon rate of 7.5 percent. The bonds mature in 8 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.) View transaction list Journal entry worksheet Record the issuance of bonds. Note: Enter debits before credits. Date General Journal Debit Credit January 01 Record entry Clear entry View general journalExplanation / Answer
Isssue Price of bonds: Period Cash Flow PVF (4.25%) PV of Cash Flow 1 to 16 26625 11.4403 304597.9875 16 710000 0.5138 364798 669395.9875 Amortisation schedule: Period Interest Expense Interest payable Amortised Discount Unamortised Discount Carrying Value 0 40604 669396 1 28449.33 26625 1824.33 38779.67 671220.33 2 28526.86403 26625 1901.864025 36877.80598 673122.194 3 28607.69325 26625 1982.693246 34895.11273 675104.8873 4 28691.95771 26625 2066.957709 32828.15502 677171.845 5 28779.80341 26625 2154.803412 30673.35161 679326.6484 6 28871.38256 26625 2246.382557 28426.96905 681573.0309 7 28966.85382 26625 2341.853815 26085.11524 683914.8848 8 29066.3826 26625 2441.382602 23643.73263 686356.2674 9 29170.14136 26625 2545.141363 21098.59127 688901.4087 10 29278.30987 26625 2653.309871 18445.2814 691554.7186 11 29391.07554 26625 2766.075541 15679.20586 694320.7941 12 29508.63375 26625 2883.633751 12795.57211 697204.4279 13 29631.18819 26625 3006.188185 9789.383923 700210.6161 14 29758.95118 26625 3133.951183 6655.43274 703344.5673 15 29892.14411 26625 3267.144109 3388.288631 706611.7114 16 30030.99773 26625 3405.997733 -17.70910211 710017.7091 Requirement 1: Journal Entry to record the issuance of bonds: Jan-01 Cash a/c Dr 669396 Discount on issue of bonds Dr 40604 To Bonds Payable a/c 710000 Requirement 2: Journal Entry to record payment on June 30: Jun-30 Interest Expense a/c Dr 28449 To Interest Payable a/c 26625 To Discount on issue of bonds 1824 Interest payable a/c Dr 26625 To Cash a/c 26625 Requirement 3: Bond Payable amount as on June 30: Long term Liabilities Carrying Value as on Jan 1st 669396 Amortised Discount 1825 671221