On January 1, 2022, Broncos Universal issued 12% bonds dated January 1, 2022, with a face amount of $200 million. The bonds mature in10 years. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2022. 2. Prepare the journal entry to record the bond issuance on January 1, 2022. 3. Prepare the journal entry to record interest on June 30, 2022, using the effective interest method. 4. Prepare the journal entry to record interest on December 31, 2022, using the effective interest method.
I. On January 1, 2022, Broncos Universal issued 12% bonds dated January 1, 2022, with a face amount of $200 million. The bonds mature in10 years. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2022.
2. Prepare the
3. Prepare the journal entry to record interest on June 30, 2022, using the effective interest method.
4. Prepare the journal entry to record interest on December 31, 2022, using the effective interest method.
II. On December 1, 20x1, AVS Company issued 10% bonds with a face amount of $20 million. The bonds mature in 5 years. For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on May 31 and November 30. AVS is a calendar-year corporation.
- Determine the price of the bonds at December 1, 20x1. Explain how you compute this price. No credit if not explained.
2.Prepare the journal entry to record the bond issuance on December 1, 20x1.
3. Prepare an amortization table using the effective interest method.
4. Prepare the journal entry (using the effective interest method) on December 31, 20x1 (
5. Prepare the journal entries (using the effective interest method) on May 31, 20x2 (1st payment).
6. What would be the journal entry if all bonds are retired at 103 on June 1, 20x3 right after the third payment.
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