On February 1, 2018, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of $80million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturitywas 10%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $80,000 of thebonds as a long-term investment. The fiscal years of both firms end December 31.Required:1. Determine the price of the bonds issued on February 1, 2018.2. Prepare amortization schedules that indicate (a) Cromley’s effective interest expense and (b) Barnwell’s effective interest revenue for each interest period during the term to maturity.3. Prepare the journal entries to record (a) the issuance of the bonds by Cromley and (b) Barnwell’s investmenton February 1, 2018.4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January31, 2020
On February 1, 2018, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of $80
million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity
was 10%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $80,000 of the
bonds as a long-term investment. The fiscal years of both firms end December 31.
Required:
1. Determine the price of the bonds issued on February 1, 2018.
2. Prepare amortization schedules that indicate (a) Cromley’s effective interest expense and (b) Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the
on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January
31, 2020
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 9 images
