On January 1, 2014, Frog Corporation sold a $2,800,000, 12 percent bond issue (6
ID: 2754093 • Letter: O
Question
On January 1, 2014, Frog Corporation sold a $2,800,000, 12 percent bond issue (6 percent market rate). The bonds were dated January 1, 2014, pay interest each June 30 and December 31, and mature in 3 years. (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.)
Prepare the journal entry to record the interest payment on June 30, 2014. Use effective-interest amortization. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Show how the bonds payable should be reported on the June 30, 2014, financial statements.
Explanation / Answer
Bond Valuation (Amount in $) Face Value 28,00,000.00 Annual Coupon Rate 12.00% Annual Required Return 6.00% Years to Maturity 3 Payment Frequency 2 Value of Bond 32,55,044.08 Particulars Debit Credit Cash 3255044.081 Bonds Premium 4,55,044.08 Bonds payable 28,00,000.00 Interest expense 92159.32 Bond Premium 75840.68 Cash 168000.00