Chapter%2012%20Homework%20Solutions

# Chapter%2012%20Homework%20Solutions - 12–28. (a) Because...

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Unformatted text preview: 12–28. (a) Because the market rate equals the stated rate, the face value of the bond will equal the market value of the bond. In this case, a bond issuance with a face value of \$90 million will result in cash to George’s of \$90 million. The associated journal entry would be Cash ..................................................................... 90,000,000 Bonds Payable ............................................... 90,000,000 (b) Because this zero-coupon bond has no interest annuity associated with it. With a business calculator: PV = \$90,000,000; N = 20; I = 7% FV = \$348,271,602 Thus, to receive proceeds from the bond sale of \$90,000,000, George’s would have to issue zero-coupon bonds with a face value of approximately \$348,271,602. The related journal entry would be Cash ..................................................................... 90,000,000 Discount on Bonds Payable .............................. 258,271,602 Bonds Payable ................................................. 348,271,602 12–32. 1. a. Interest Expense ....................................................... 25,038 Discount on Bonds Payable ............................... 7,538* Cash ...................................................................... 17,500 *Discount amortization: \$500,000 – \$424,624 = \$75,376 \$75,376 ÷ 10 semiannual interest periods = \$7,538 (rounded) Interest Expense ....................................................... 25,038 Discount on Bonds Payable ............................... 7,538 Cash ...................................................................... 17,500 b. Interest Expense ....................................................... 23,354 Discount on Bonds Payable ............................... 5,854* Cash ...................................................................... 17,500 *Discount amortization: \$424,624 0.055 = \$23,354 \$23,354 – \$17,500 = \$5,854 Interest Expense ....................................................... 23,676 Discount on Bonds Payable ............................... 6,176* Cash ...................................................................... 17,500 *Discount amortization: \$424,624 + \$5,854 = \$430,478 \$430,478 0.055 = \$23,676 \$23,676 – \$17,500 = \$6,176 12–32. (Concluded) 2. Cash ........................................................................... 17,500 Bond Investment—Tanzanite Corp......................... Bond Investment—Tanzanite Corp....
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## This note was uploaded on 04/06/2011 for the course ACCT 4050 taught by Professor Rodney during the Spring '11 term at UGA.

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Chapter%2012%20Homework%20Solutions - 12–28. (a) Because...

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