Park Corporation is planning to issue bonds with a face value of $620,000 and a
ID: 2593084 • Letter: P
Question
Park Corporation is planning to issue bonds with a face value of $620,000 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 $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required:
1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No
Date
General Journal
Debit
Credit
1
1
January 01
Cash
?
2
Discount on bonds payable
?
3
Bonds payable
?
2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No
Date
General Journal
Debit
Credit
1
1
June 30
Interest Expense
?
2
Discount on bonds payable
?
3
Cash
?
3. What bond payable amount will Park report on its June 30 balance sheet? (Enter all amounts with a positive sign.)
PARK CORPORATION
Balance Sheet (Partial)
At June 30
Long-term liabilities
Bonds payable
?
Discount on bonds payable
??
?-
No
Date
General Journal
Debit
Credit
1
1
January 01
Cash
?
2
Discount on bonds payable
?
3
Bonds payable
?
Explanation / Answer
1. Journal entry to record the issuance of the bonds is as prepared below:
2. journal entry to record the interest payment on June 30 of this year
Working:
3. Bond payable amount Park will report on its June 30 balance sheet is:
Year Particulars L.F Debit ($) Credit ($) Jan-01 Cash 584,537 Discount on Bonds payable 35,463 Bond Payable 620,000 (For 8 year bonds issued at discount)