When Patey Pontoons issued 6% bonds on January 1, 2024, with a face amount of $600,000, the market yield for bonds of similar risk and maturity was 7%. The bonds mature December 31, 2027 (4 years). Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2024. 2. Prepare the journal entry to record their issuance by Patey on January 1, 2024. 3. Prepare an amortization schedule that determines interest at the effective rate each period. 4. Prepare the journal entry to record interest on June 30, 2024. 5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2024?
When Patey Pontoons issued 6% bonds on January 1, 2024, with a face amount of $600,000, the market yield for bonds of similar risk and maturity was 7%. The bonds mature December 31, 2027 (4 years). Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2024. 2. Prepare the journal entry to record their issuance by Patey on January 1, 2024. 3. Prepare an amortization schedule that determines interest at the effective rate each period. 4. Prepare the journal entry to record interest on June 30, 2024. 5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2024?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![Exercise 14-9 (Static) Issuance of bonds; effective interest; amortization schedule; financial statement
effects [LO14-2]
When Patey Pontoons issued 6% bonds on January 1, 2024, with a face amount of $600,000, the market yield for bonds of similar risk
and maturity was 7%. The bonds mature December 31, 2027 (4 years). Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2024.
2. Prepare the journal entry to record their issuance by Patey on January 1, 2024.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2024.
5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2024?
6. What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2024?
(Ignore income taxes.)
7. Prepare the appropriate journal entries at maturity on December 31, 2027.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3
Req 4
Req 5 and 6
Req 7
Prepare an amortization schedule that determines interest at the effective rate each period.
Note: Round intermediate calculations and final answers to the nearest whole dollar.
Increase in
Date
Cash Payment Effective Interest
Balance
01/01/2024
06/30/2024
12/31/2024
06/30/2025
12/31/2025
06/30/2026
12/31/2026
06/30/2027
12/31/2027
Total
Outstanding
Balance
<Req 2
Req 4 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F45771f59-3290-4674-bf0b-df5a349a7c67%2Fb47b7de4-8176-4bde-99ac-bd6aa5a61564%2Fhyzxblo_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 14-9 (Static) Issuance of bonds; effective interest; amortization schedule; financial statement
effects [LO14-2]
When Patey Pontoons issued 6% bonds on January 1, 2024, with a face amount of $600,000, the market yield for bonds of similar risk
and maturity was 7%. The bonds mature December 31, 2027 (4 years). Interest is paid semiannually on June 30 and December 31.
Required:
1. Determine the price of the bonds at January 1, 2024.
2. Prepare the journal entry to record their issuance by Patey on January 1, 2024.
3. Prepare an amortization schedule that determines interest at the effective rate each period.
4. Prepare the journal entry to record interest on June 30, 2024.
5. What is the amount related to the bonds that Patey will report in its balance sheet at December 31, 2024?
6. What is the amount related to the bonds that Patey will report in its income statement for the year ended December 31, 2024?
(Ignore income taxes.)
7. Prepare the appropriate journal entries at maturity on December 31, 2027.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3
Req 4
Req 5 and 6
Req 7
Prepare an amortization schedule that determines interest at the effective rate each period.
Note: Round intermediate calculations and final answers to the nearest whole dollar.
Increase in
Date
Cash Payment Effective Interest
Balance
01/01/2024
06/30/2024
12/31/2024
06/30/2025
12/31/2025
06/30/2026
12/31/2026
06/30/2027
12/31/2027
Total
Outstanding
Balance
<Req 2
Req 4 >
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VIEWStep 2: (1) Determine the price of the bonds at January 1, 2024:
VIEWStep 3: (2) Prepare the journal entry to record their issuance by Patey on January 1,2024:
VIEWStep 4: (3) Prepare an amortization schedule that determines interest at the effective rate each period:
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