McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2018. The bonds matureon December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield was 10%. Interest ispaid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $400,000 of the bonds asa long-term investment.Required:1. Determine the price of the bonds issued on January 1, 2018.2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton’s investment on January1, 2018.3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2018 (at the effective rate).4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2018 (at theeffective rate).
McWherter Instruments sold $400 million of 8% bonds, dated January 1, on January 1, 2018. The bonds mature
on December 31, 2037 (20 years). For bonds of similar risk and maturity, the market yield was 10%. Interest is
paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $400,000 of the bonds as
a long-term investment.
Required:
1. Determine the price of the bonds issued on January 1, 2018.
2. Prepare the
1, 2018.
3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2018 (at the effective rate).
4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2018 (at the
effective rate).
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