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Rasek [7]
1 year ago
7

On January 1 of this year, Trucks R Us Corporation issued bonds with a face value of $ 2,000,000 and a coupon rate of 10 percent

. The bonds mature in five years and pay interest semiannually every June 30 and December 31. When the bonds were sold, the annual market rate of interest was 10 percent.
Required:
(a) What was the issue price on January 1 of this year?
Business
1 answer:
nydimaria [60]1 year ago
4 0

Bonds Payable amount reflected in balance sheet = $2192890

Face Value = $2000000

Coupon Rate = 10%

Maturity Period = 10 years

Number of compounding = 2

Interest = $2000000 * 10% * 6/12 = $100000

Period = 2 * 10 = 20

Maturity Value = Face Value = $2000000

Market Interest Rate semiannually = 0.085 / 2 = 0.0425

Market Value = Present Value of Future Cash Flows

= PV of Interest + PV of maturity value

= (Interest * PVAF (4.25%, 20)) + (Maturity Value * PVIF (4.25%, 20))

= (100000 * 13.29437) + (2000000 * 0.434989)

= $1329437 + $869978

= $2199415

Since market value is greater than face value, we can say that bonds are issued at a premium.

Premium = $2199415 - $2000000 = $199415

Journal Entry to record the issuance of bonds:

Cash a/c                                               Dr          $2199415

     To Bonds Payable a/c                                 $2000000                            

     To Premium on the issue of bonds            $199415

Bonds Payable amount is a liability account that carries the quantity owed to bondholders by way of the company. This account usually seems in the lengthy-term liabilities section of the stability sheet, on account that bonds usually mature in more than one year.

Learn more about Bonds Payable amount here: brainly.com/question/7158291

#SPJ4

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Fraud Investigators Inc. operates a fraud detection service. On March 31, 10 customers were billed for detection services totali
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Answer:

Fraud Investigators Inc.

1. Journal Entries:

March 31:  Debit Accounts Receivable $21,000

Credit Service Revenue $21,000

To record the rendering of service on account.

Oct. 31: Debit Allowance for Uncollectible Accounts $1,300

Credit Accounts Receivable $1,300

To write-off uncollectible accounts.

Dec. 15: Debit Accounts Receivable $760

Credit Allowance for Uncollectible Accounts $760

To reverse a previously written-off account.

Dec. 15: Debit Cash $760

Credit Accounts Receivable $760

To record the cash collected from the customer.

Dec. 31: Debit Bad Debts Expense $460

Credit Allowance for Uncollectible Accounts $460

To record bad debts expense for the year.

A) Debit Accounts Receivable $34,000

Credit Service Revenue $34,000

To record the rendering of service on account.

B) Debit Allowance for Uncollectible Accounts $1,950

Credit Accounts Receivable $1,950

To write off uncollectible accounts.

C1) Debit Accounts Receivable $810

Credit Allowance for Uncollectible Accounts $810

To reverse a previously written-off debt.

C2) Debit Cash $810

Credit Accounts Receivable $810

To record the receipt of cash from the customer.

D) Debit Bad Debts Expense $590

Credit Allowance for Uncollectible Accounts $590

To record bad debts expense for the year.

2. Transaction  Net Receivable  Net Sales   Income From Operation

        A                  +34,000           +34,000           +34,000

        B                  -1,950                 NE                   -1950

        C                  +/- 810                NE                    +810

        D                   NE                     NE                    -590

Explanation:

a) Data and Analysis:

March 31:  Accounts Receivable $21,000 Service Revenue $21,000

Oct. 31: Allowance for Uncollectible Accounts $1,300 Accounts Receivable $1,300

Dec. 15: Accounts Receivable $760 Allowance for Uncollectible Accounts $760

Dec. 15: Cash $760 Accounts Receivable $760

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B) Allowance for Uncollectible Accounts $1,950 Accounts Receivable $1,950

C1) Accounts Receivable $810 Allowance for Uncollectible Accounts $810

C2) Cash $810 Accounts Receivable $810

D) Bad Debts Expense $590 Allowance for Uncollectible Accounts $590

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