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Vadim26 [7]
3 years ago
8

On January 1, 2021, Bishop Company issued 6% bonds dated January 1, 2021, with a face amount of $33 million. The bonds mature in

2033 (10 years). For bonds of similar risk and maturity, the market yield is 8%. Interest is paid semiannually on June 30 and December 31.
Required:
a. Determine the price of the bonds at January 1, 2021.
b. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2021.
c. Prepare the journal entry to record interest on June 30, 2021, using the effective interest method.
d. Prepare the journal entry to record interest on December 31, 2021, using the effective interest method.
Business
1 answer:
Allisa [31]3 years ago
4 0

Answer:

a. Determine the price of the bonds at January 1, 2021.

market price:

PV of face value = $33,000,000 / 1.04²⁰ = $15,060,769

PV of coupon payments = $990,000 x 13.590 (PV annuity factor, 4%, 20 periods) = $13,454,100

market price = $28,514,869

b. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2021.

Dr Cash 28,514,869

Dr Discount on bonds payable 4,485,131

    Cr Bonds payable 33,000,000

c. Prepare the journal entry to record interest on June 30, 2021, using the effective interest method.

amortization of bond discount = ($28,514,869 x 4%) - $990,000 = $150,595

Dr Interest expense 1,140,595

    Cr Cash 990,000

    Cr Discount on bonds payable 150,595

d. Prepare the journal entry to record interest on December 31, 2021, using the effective interest method.

amortization of bond discount = ($28,665,464 x 4%) - $990,000 = $156,619

Dr Interest expense 1,146,619

    Cr Cash 990,000

    Cr Discount on bonds payable 156,619

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Answer:

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In 9 years after depositing $160, in my savings account would be $289.6

The formula for simple interest and procedure we will use to solve this exercise is:

S.I.= (P*R*T)/100

Where:

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  • R = rate of interest in % per annum
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Information about the problem:

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  • R = 9%
  • T = 9 years
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Applying the simple interest formula, we get:

S.I.= (P*R*T)/100

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Total amount = $289.6

<h3>What is simple interest?</h3>

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If we used the retail method to estimate the ending inventory first we get the given of the problem that can be used in solving.
 Given
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First, we need to get the cost of retail ratio. the formula is 
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Next is to get the ending inventory by following this steps
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It is sometimes used to categorize inflation according to cost-push, demand-pull, and built-in factors.

The two most popular inflation measures are the Consumer Price Index and the Wholesale Price Index.

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Inflation may be advantageous for those who own tangible assets since it will raise the value of their holdings, such as real estate or goods that are kept in storage.

Inflation's primary causes include:

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