Issuance of a Bond at Face Value
On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar.
Required:
1.Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar. $
Identify and analyze the effect of the issuance of the bonds on January 1, 2017.
How does this entry affect the accounting equation?If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
2.How would the issue price have been affected if the market rate of interest had been higher than 10%.Bonds would be issued at a discount.
3.Identify and analyze the effect of the payment of interest on July 1, 2017.
Identify and analyze the transaction by using the following steps:1. Determine activity – operating, investing or financing.2. Determine accounts affected and the amount of increases/decreases.3. Determine the financial statements affected – balance sheet, income statement.The accounting equation must balance for each transaction.
4.Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar.$
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