5) Compute the price of $28,279,368 received for the bonds by using the present value tables. (Round to the nearest dollar.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

On July 1, 20Y1, Danzer Industries Inc. issued $30,000,000 of 10-year, 11% bonds at a market (effective) interest rate of 12%, receiving cash of $28,279,368. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.

2. Journalize the entries to record the following:

A) The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar

B) The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)

3. Determine the total interest expense for 20Y1.

4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? Yes or No

5) Compute the price of $28,279,368 received for the bonds by using the present value tables. (Round to the nearest dollar.)

Attached is the table of present values:

 

Present Value Tables
Two present value tables are provided: Present Value of $1 at Compound Interest Due in n Periods and Pre:
Present Value of $1 at Compound Interest Due in n Periods
Periods
4.0%
4.5%
5%
5.5%
6%
6.5%
7%
1
0.96154
0.95694
0.95238
0.94787
0.94340
0.93897
0.93458
0.92456
0.91573
0.90703
0.89845
0.89000
0.88166
0.87344
3
0.88900
0.87630
0.86384
0.85161
0.83962
0.82785
0.81630
4
0.85480
0.83856
0.82270
0.80722
0.79209
0.77732
0.76290
5
0.82193
0.80245
0.78353
0.76513
0.74726
0.72988
0.71299
0.79031
0.76790
0.74622
0.72525
0.70496
0.68533
0.66634
7
0.75992
0.73483
0.71068
0.68744
0.66506
0.64351
0.62275
8
0.73069
0.70319
0.67684
0.65160
0.62741
0.60423
0.58201
9
0.70259
0.67290
0.64461
0.61763
0.59190
0.56735
0.54393
10
0.67556
0.64393
0.61391
0.58543
0.55839
0.53273
0.50835
11
0.64958
0.61620
0.58468
0.55491
0.52679
0.50021
0.47509
12
0.62460
0.58966
0.55684
0.52598
0.49697
0.46968
0.44401
13
0.60057
0.56427
0.53032
0.49856
0.46884
0.44102
0.41496
14
0.57748
0.53997
0.50507
0.47257
0.44230
0.41410
0.38782
15
0.55526
0.51672
0.48102
0.44793
0.41727
0.38883
0.36245
16
0.53391
0.49447
0.45811
0.42458
0.39365
0.36510
0.33873
17
0.51337
0.47318
0.43630
0.40245
0.37136
0.34281
0.31657
18
0.49363
0.45280
0.41552
0.38147
0.35034
0.32189
0.29586
19
0.47464
0.43330
0.39573
0.36158
0.33051
0.30224
0.27651
20
0.45639
0.41464
0.37689
0.34273
0.31180
0.28380
0.25842
Present Value Tables
21
0.43883
0,39679
0.35894
0.32486
0.29416
0.26648
0.24151
22
0.42196
0.37970
0.34185
0.30793
0.27751
0.25021
0.22571
23
0.40573
0.36335
0.32557
0.29187
0.26180
0.23494
0.21095
24
0.39012
0,34770
0.31007
0.27666
0.24698
0.22060
0.19715
25
0.37512
0.33273
0.29530
0.26223
0.23300
0.20714
0.18425
26
0.36069
0.31840
0.28124
0.24856
0.21981
0.19450
0.17220
27
0.34682
0.30469
0.26785
0.23560
0.20737
0.18263
0.16093
28
0.33348
0.29157
0.25509
0.22332
0.19563
0.17148
0.15040
29
0.32065
0.27902
0.24295
0.21168
0.18456
0.16101
0.14056
30
0.30832
0.26700
0.23138
0.20064
0.17411
0.15119
0.13137
31
0.29646
0.25550
0.22036
0.19018
0.16425
0.14196
0.12277
32
0.28506
0.24450
0.20987
0.18027
0.15496
0.13329
0.11474
33
0.27409
0.23397
0.19987
0.17087
0.14619
0.12516
0.10723
34
0.26355
0.22390
0.19035
0.16196
0.13791
0.11752
0.10022
35
0.25342
0.21425
0.18129
0.15352
0.13011
0.11035
0.09366
40
0.20829
0.17193
0.14205
0.11746
0.09722
0.08054
0.06678
45
0.17120
0.13796
0.11130
0.08988
0.07265
0.05879
0.04761
50
0.14071
0.11071
0.08720
0.06877
0.05429
0.04291
0.03395
Present Value of Ordinary Annuity of $1 per Period
Periods
4.0%
4.5%
5%
5.5%
6%
6.5%
7%
1
0.96154
0.95694
0.95238
0.94787
0.94340
0.93897
0.93458
2
1.88609
1.87267
1.85941
1.84632
1.83339
1.82063
1.80802
3
2.77509
2.74896
2.72325
2.69793
2.67301
2.64848
2.62432
3.62990
3.58753
3,54595
3.50515
3.46511
3.42580
3.38721
4.45182
4.38998
4.32948
4.27028
4.21236
4.15568
4.10020
Transcribed Image Text:Present Value Tables Two present value tables are provided: Present Value of $1 at Compound Interest Due in n Periods and Pre: Present Value of $1 at Compound Interest Due in n Periods Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 7% 1 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 0.92456 0.91573 0.90703 0.89845 0.89000 0.88166 0.87344 3 0.88900 0.87630 0.86384 0.85161 0.83962 0.82785 0.81630 4 0.85480 0.83856 0.82270 0.80722 0.79209 0.77732 0.76290 5 0.82193 0.80245 0.78353 0.76513 0.74726 0.72988 0.71299 0.79031 0.76790 0.74622 0.72525 0.70496 0.68533 0.66634 7 0.75992 0.73483 0.71068 0.68744 0.66506 0.64351 0.62275 8 0.73069 0.70319 0.67684 0.65160 0.62741 0.60423 0.58201 9 0.70259 0.67290 0.64461 0.61763 0.59190 0.56735 0.54393 10 0.67556 0.64393 0.61391 0.58543 0.55839 0.53273 0.50835 11 0.64958 0.61620 0.58468 0.55491 0.52679 0.50021 0.47509 12 0.62460 0.58966 0.55684 0.52598 0.49697 0.46968 0.44401 13 0.60057 0.56427 0.53032 0.49856 0.46884 0.44102 0.41496 14 0.57748 0.53997 0.50507 0.47257 0.44230 0.41410 0.38782 15 0.55526 0.51672 0.48102 0.44793 0.41727 0.38883 0.36245 16 0.53391 0.49447 0.45811 0.42458 0.39365 0.36510 0.33873 17 0.51337 0.47318 0.43630 0.40245 0.37136 0.34281 0.31657 18 0.49363 0.45280 0.41552 0.38147 0.35034 0.32189 0.29586 19 0.47464 0.43330 0.39573 0.36158 0.33051 0.30224 0.27651 20 0.45639 0.41464 0.37689 0.34273 0.31180 0.28380 0.25842 Present Value Tables 21 0.43883 0,39679 0.35894 0.32486 0.29416 0.26648 0.24151 22 0.42196 0.37970 0.34185 0.30793 0.27751 0.25021 0.22571 23 0.40573 0.36335 0.32557 0.29187 0.26180 0.23494 0.21095 24 0.39012 0,34770 0.31007 0.27666 0.24698 0.22060 0.19715 25 0.37512 0.33273 0.29530 0.26223 0.23300 0.20714 0.18425 26 0.36069 0.31840 0.28124 0.24856 0.21981 0.19450 0.17220 27 0.34682 0.30469 0.26785 0.23560 0.20737 0.18263 0.16093 28 0.33348 0.29157 0.25509 0.22332 0.19563 0.17148 0.15040 29 0.32065 0.27902 0.24295 0.21168 0.18456 0.16101 0.14056 30 0.30832 0.26700 0.23138 0.20064 0.17411 0.15119 0.13137 31 0.29646 0.25550 0.22036 0.19018 0.16425 0.14196 0.12277 32 0.28506 0.24450 0.20987 0.18027 0.15496 0.13329 0.11474 33 0.27409 0.23397 0.19987 0.17087 0.14619 0.12516 0.10723 34 0.26355 0.22390 0.19035 0.16196 0.13791 0.11752 0.10022 35 0.25342 0.21425 0.18129 0.15352 0.13011 0.11035 0.09366 40 0.20829 0.17193 0.14205 0.11746 0.09722 0.08054 0.06678 45 0.17120 0.13796 0.11130 0.08988 0.07265 0.05879 0.04761 50 0.14071 0.11071 0.08720 0.06877 0.05429 0.04291 0.03395 Present Value of Ordinary Annuity of $1 per Period Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 7% 1 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 2 1.88609 1.87267 1.85941 1.84632 1.83339 1.82063 1.80802 3 2.77509 2.74896 2.72325 2.69793 2.67301 2.64848 2.62432 3.62990 3.58753 3,54595 3.50515 3.46511 3.42580 3.38721 4.45182 4.38998 4.32948 4.27028 4.21236 4.15568 4.10020
5.24214
5.15787
5.07569
4.99553
4.91732
4.84101
4.76654
7
6.00205
5.89270
5.78637
5.68297
5.58238
5.48452
5.38929
8
6.73274
6.59589
6.46321
6.33457
6.20979
6.08875
5.97130
9.
7.43533
7.26879
7.10782
6.95220
6.80169
6.65610
6.51523
10
8.11090
7.91272
7.72173
7.53763
7.36009
7.18883
7.02358
11
8.76048
8.52892
8.30641
8.09254
7.88687
7.68904
7.49867
12
9.38507
9.11858
8.86325
8.61852
8.38384
8.15873
7.94269
13
9.98565
9.68285
9.39357
9.11708
8.85268
8.59974
8.35765
14
10.56312
10.22283
9.89864
9.58965
9.29498
9.01384
8.74547
15
11.11839
10.73955
10.37966
10.03758
9.71225
9.40267
9.10791
16
11.65230
11.23402
10.83777
10.46216
10.10590
9.76776
9.44665
17
12.16567
11.70719
11.27407
10.86461
10.47726
10.11058
9.76322
18
12.65930
12.15999
11.68959
11.24607
10.82760
10.43247
10.05909
19
13.13394
12.59329
12.08532
11.60765
11.15812
10.73471
10.33560
20
13.59033
13.00794
12.46221
11.95038
11.46992
11.01851
10.59401
21
14.02916
13.40472
12.82115
12.27524
11.76408
11.28498
10.83553
22
14.45112
13.78442
13.16300
12.58317
12.04158
11.53520
11.06124
23
14.85684
14.14777
13.48857
12.87504
12.30338
11.77014
11.27219
24
15.24696
14.49548
13.79864
13.15170
12.55036
11.99074
11.46933
25
15.62208
14.82821
14.09394
13.41393
12.78336
12.19788
11.65358
26
15.98277
15.14661
14.37519
13.66250
13.00317
12.39237
11.82578
27
16.32959
15.45130
14.64303
13.89810
13.21053
12.57500
11.98671
28
16.66306
15.74287
14.89813
14.12142
13.40616
12.74648
12.13711
29
16.98371
16.02189
15.14107
14.33310
13.59072
12.90749
12.27767
30
17.29203
16.28889
15.37245
14.53375
13.76483
13.05868
12.40904
31
17.58849
16.54439
15.59281
14.72393
13.92909
13.20063
12.53181
32
17.87355
16.78889
15.80268
14.90420
14.08404
13.33393
12.64656
33
18.14765
17.02286
16.00255
15.07507
14.23023
13.45909
12.75379
34
18.41120
17.24676
16.19290
15.23703
14.36814
13.57661
12.85401
35
18.66461
17.46101
16.37419
15.39055
14.49825
13.68696
12.94767
40
19.79277
18.40158
17.15909
16.04612
15.04630
14.14553
13.33171
45
20.72004
19.15635
17.77407
16.54773
15.45583
14.48023
13.60552
50
21.48218
19.76201
18.25593
16.93152
15.76186
14.72452
13.80075
Transcribed Image Text:5.24214 5.15787 5.07569 4.99553 4.91732 4.84101 4.76654 7 6.00205 5.89270 5.78637 5.68297 5.58238 5.48452 5.38929 8 6.73274 6.59589 6.46321 6.33457 6.20979 6.08875 5.97130 9. 7.43533 7.26879 7.10782 6.95220 6.80169 6.65610 6.51523 10 8.11090 7.91272 7.72173 7.53763 7.36009 7.18883 7.02358 11 8.76048 8.52892 8.30641 8.09254 7.88687 7.68904 7.49867 12 9.38507 9.11858 8.86325 8.61852 8.38384 8.15873 7.94269 13 9.98565 9.68285 9.39357 9.11708 8.85268 8.59974 8.35765 14 10.56312 10.22283 9.89864 9.58965 9.29498 9.01384 8.74547 15 11.11839 10.73955 10.37966 10.03758 9.71225 9.40267 9.10791 16 11.65230 11.23402 10.83777 10.46216 10.10590 9.76776 9.44665 17 12.16567 11.70719 11.27407 10.86461 10.47726 10.11058 9.76322 18 12.65930 12.15999 11.68959 11.24607 10.82760 10.43247 10.05909 19 13.13394 12.59329 12.08532 11.60765 11.15812 10.73471 10.33560 20 13.59033 13.00794 12.46221 11.95038 11.46992 11.01851 10.59401 21 14.02916 13.40472 12.82115 12.27524 11.76408 11.28498 10.83553 22 14.45112 13.78442 13.16300 12.58317 12.04158 11.53520 11.06124 23 14.85684 14.14777 13.48857 12.87504 12.30338 11.77014 11.27219 24 15.24696 14.49548 13.79864 13.15170 12.55036 11.99074 11.46933 25 15.62208 14.82821 14.09394 13.41393 12.78336 12.19788 11.65358 26 15.98277 15.14661 14.37519 13.66250 13.00317 12.39237 11.82578 27 16.32959 15.45130 14.64303 13.89810 13.21053 12.57500 11.98671 28 16.66306 15.74287 14.89813 14.12142 13.40616 12.74648 12.13711 29 16.98371 16.02189 15.14107 14.33310 13.59072 12.90749 12.27767 30 17.29203 16.28889 15.37245 14.53375 13.76483 13.05868 12.40904 31 17.58849 16.54439 15.59281 14.72393 13.92909 13.20063 12.53181 32 17.87355 16.78889 15.80268 14.90420 14.08404 13.33393 12.64656 33 18.14765 17.02286 16.00255 15.07507 14.23023 13.45909 12.75379 34 18.41120 17.24676 16.19290 15.23703 14.36814 13.57661 12.85401 35 18.66461 17.46101 16.37419 15.39055 14.49825 13.68696 12.94767 40 19.79277 18.40158 17.15909 16.04612 15.04630 14.14553 13.33171 45 20.72004 19.15635 17.77407 16.54773 15.45583 14.48023 13.60552 50 21.48218 19.76201 18.25593 16.93152 15.76186 14.72452 13.80075
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