FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:On January 1, 2020, Everly Bottle Company sold
$3,000,000 in long-term bonds. The bonds will mature in 5 years and have a
stated interest rate of 8% and a yield rate of 10%. The bonds pay interest
July 1 and January 1 of each year. The bonds are to be accounted for under
the effective-interest method.
Instructions:
1. Calculate the bond proceeds using the attached present value tables.
2. Prepare a Bond Discount/Premium Amortization Schedule.
3. Prepare the journal entry to record the bonds on the date of issue,
January 1, 2020.
4. Prepare the journal entry to record the first payment and amortization of
the discount/premium on July 1, 2020.
5. Prepare the journal entry to record the accrued interest and amortization
of the discount/premium on December 31, 2020.
6. Prepare the journal entry to record the payment of the bonds at
maturity; January 1, 2025. Assume the appropriate accrual was made on
December 31, 2024 (see 5. above)
![Table A-4 Present Value Interest Factors for a One-Dollar Annuity
Discounted at k Percent for n Periods: PVIFA = [1 - 1/(1+ k)n] / k
Period
1
2
3
4
6
6
7
8
9
10
Period
1
2
3
4
5
6
7
8
1%
0.9901
1.9704
2.9410
9
10
3.9020
4.8534
5.7955
6.7282
7.6517
8.5660
9.4713
1%
0.9901
0.9803
0.9706
0.9610
0.9515
2%
0.9804
1.9416
2.8839
3.8077
4.7135
0.9420
0.9327
0.9235
0.9143
0.9053
5.6014
6.4720
7.3255
8.1622
8.9826
2%
0.9804
0.9612
0.9423
Table A-3 Present Value Interest Factors for One Dollar Discounted at k
Percent for n Periods: PVIF kn = 1/(1+k) "
0.9238
0.9057
0.8880
3%
0.9709
1.9136
2.8286
3.7171
4.5797
0.8706
0.8535
0.8368
0.8203
5.4172
6.2303
7.0197
7.7861
8.5302
3%
0.9709
0.9426
0.9161
0.8885
0.8626
4%
0.9615
1.8861
2.7751
3.6299
4.4518
0.8375
0.8131
0.7894
0.7664
0.7441
5.2421
6.0021
6.7327
7.4353
8.1109
4%
0.9615
0.9246
0.8890
0.8548
0.8219
0.7903
0.7599
0.7307
5%
0.9524
1.8694
2.7232
3.5460
4.3295
0.7026
0.6756
4.9173
5.5824
6.2098
7.1078
6.8017
7.7217 7.3601
5.0757
5.7864
6.4632
5%
0.9524
0.9070
0.8638
0.8227
0.7835
6%
0.9434
1.8334
2.6730
3.4651
4.2124
0.7462
0.7107
0.6768
0.6446
0.6139
6%
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
0.6651
0.6274
0.5919
7%
0.9346
1.8080
2.6243
3.3872
4.1002
0.5584
7%
4.7665
4.6229
5.3893
5.2064
5.9713
5.7466
6.5152
6.2469
6.7101
7.0236
0.9346
0.8734
0.8163
8%
0.9259
1.7833
2.5771
3.3121
3.9927
0.7629
0.7130
0.6663
0.6227
0.5820
0.5439
0.5083
8%
0.9259
0.8573
0.7938
0.7350
0.6806
0.6302
9%
10%
0.9174
0.9091
1.7591 1.7355
2.5313
2.4869
3.2397
3.1699
3.8897
3.7908
0.5835
0.5403
0.5002
0.4632
4.4859
5.0330
5.5348
5.9952
5.7590
6.4177 6.1446
9%
4.3553
4.8684
5.3349
0.9174
0.8417
0.7722
0.7084
0.6499
0.5963
0.5470
0.5019
0.4604
0.4224
10%
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3856](https://content.bartleby.com/qna-images/question/d32d6cc9-9800-43be-ac45-0d98c4f2b23d/b87bda50-4040-4b96-99ed-2bed0b264cc6/5nazxte_processed.jpeg)
Transcribed Image Text:Table A-4 Present Value Interest Factors for a One-Dollar Annuity
Discounted at k Percent for n Periods: PVIFA = [1 - 1/(1+ k)n] / k
Period
1
2
3
4
6
6
7
8
9
10
Period
1
2
3
4
5
6
7
8
1%
0.9901
1.9704
2.9410
9
10
3.9020
4.8534
5.7955
6.7282
7.6517
8.5660
9.4713
1%
0.9901
0.9803
0.9706
0.9610
0.9515
2%
0.9804
1.9416
2.8839
3.8077
4.7135
0.9420
0.9327
0.9235
0.9143
0.9053
5.6014
6.4720
7.3255
8.1622
8.9826
2%
0.9804
0.9612
0.9423
Table A-3 Present Value Interest Factors for One Dollar Discounted at k
Percent for n Periods: PVIF kn = 1/(1+k) "
0.9238
0.9057
0.8880
3%
0.9709
1.9136
2.8286
3.7171
4.5797
0.8706
0.8535
0.8368
0.8203
5.4172
6.2303
7.0197
7.7861
8.5302
3%
0.9709
0.9426
0.9161
0.8885
0.8626
4%
0.9615
1.8861
2.7751
3.6299
4.4518
0.8375
0.8131
0.7894
0.7664
0.7441
5.2421
6.0021
6.7327
7.4353
8.1109
4%
0.9615
0.9246
0.8890
0.8548
0.8219
0.7903
0.7599
0.7307
5%
0.9524
1.8694
2.7232
3.5460
4.3295
0.7026
0.6756
4.9173
5.5824
6.2098
7.1078
6.8017
7.7217 7.3601
5.0757
5.7864
6.4632
5%
0.9524
0.9070
0.8638
0.8227
0.7835
6%
0.9434
1.8334
2.6730
3.4651
4.2124
0.7462
0.7107
0.6768
0.6446
0.6139
6%
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
0.6651
0.6274
0.5919
7%
0.9346
1.8080
2.6243
3.3872
4.1002
0.5584
7%
4.7665
4.6229
5.3893
5.2064
5.9713
5.7466
6.5152
6.2469
6.7101
7.0236
0.9346
0.8734
0.8163
8%
0.9259
1.7833
2.5771
3.3121
3.9927
0.7629
0.7130
0.6663
0.6227
0.5820
0.5439
0.5083
8%
0.9259
0.8573
0.7938
0.7350
0.6806
0.6302
9%
10%
0.9174
0.9091
1.7591 1.7355
2.5313
2.4869
3.2397
3.1699
3.8897
3.7908
0.5835
0.5403
0.5002
0.4632
4.4859
5.0330
5.5348
5.9952
5.7590
6.4177 6.1446
9%
4.3553
4.8684
5.3349
0.9174
0.8417
0.7722
0.7084
0.6499
0.5963
0.5470
0.5019
0.4604
0.4224
10%
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3856
Expert Solution
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Since there are multiple subparts, we will answer only first three subparts.
Bonds is one of the form of source of finance being used in business. There can be long term bonds or short term bonds, depending on the term.
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