A company is issuing $330,000 worth of 5-year bonds on August 14, 2020, bearing an interest rate of 4%, payable annually. Assume that the current market rate of interest is 7%. a) Will the bonds be issued at a discount or at a premium? b) Calculate the value of the resulting discount or premium. C) Record the journal entry to reflect the sale of bonds and the appropriate discount or premium. Note that the present value factor for the principal is 0.7130 (7%, 5-years) and that the present value factor for the recurring interest payment is 4.1002 (7%, 5-years). Do not enter dollar signs or commas in the input boxes. Round your answers to the nearest whole number. Enter the debit accounts in alphabetical order as applicable. Enter all credit accounts in alphabetical order as applicable.
A company is issuing $330,000 worth of 5-year bonds on August 14, 2020, bearing an interest rate of 4%, payable annually. Assume that the current market rate of interest is 7%. a) Will the bonds be issued at a discount or at a premium? b) Calculate the value of the resulting discount or premium. C) Record the journal entry to reflect the sale of bonds and the appropriate discount or premium. Note that the present value factor for the principal is 0.7130 (7%, 5-years) and that the present value factor for the recurring interest payment is 4.1002 (7%, 5-years). Do not enter dollar signs or commas in the input boxes. Round your answers to the nearest whole number. Enter the debit accounts in alphabetical order as applicable. Enter all credit accounts in alphabetical order as applicable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please tell me all the formulas of these type of questions. Please help me. I think i'm failing accounting. and forgot how to do this. Show ALL solutions + formulas. Don't just give me the answers. Apparently there is both ways to solve the question , using PV tables or the financial calculator. What should I know for these questions?
Transcribed Image Text:Take me to the text
A company is issuing $330,000 worth of 5-year bonds on August 14, 2020, bearing an interest rate of 4%, payable annually. Assume that the current
market rate of interest is 7%.
a) Will the bonds be issued at a discount or at a premium?
b) Calculate the value of the resulting discount or premium.
c) Record the journal entry to reflect the sale of bonds and the appropriate discount or premium.
Note that the present value factor for the principal is 0.7130 (7%, 5-years) and that the present value factor for the recurring interest payment is
4.1002 (7%, 5-years).
Do not enter dollar signs or commas in the input boxes.
Round your answers to the nearest whole number.
Enter the debit accounts in alphabetical order as applicable. Enter all credit accounts in alphabetical order as applicable.
The bonds are issued at a : Discount
Discount or premium amount: $ 40587
Date
Account Title and Explanation
Debit
Credit
Aug 14
Cash
289413
Discount on Bonds Payable
40587
Bonds Payable
330000
Issue of bonds at discount or premium
Transcribed Image Text:AP-9B LO 3 5
On November 1, 2020, Breyer Inc. issued $800,000 worth of bonds with a 9% interest rate. The bonds were issued
at par. Interest is payable annually on October 31. The bonds mature on October 31, 2030. Breyer Inc. has a
December 31 year end.
Required
Prepare the necessary journal entries to record the following.
a) The issuance of the bonds payable on November 1, 2020
b) The required adjustment on December 31, 2020
c) The payment of interest on October 31, 2021
d) The maturity of the bonds on October 31, 2030, with interest
Date
Account Title and Explanation
Credit
Debit
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