Present Value of $1 PV of Annuity of $1 Issuance of a Bond at Face Value On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar. Required: 1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar. $ 3. Identify and analyze the effect of the payment of interest on July 1, 2017. Activity Operating Accounts Cash Decrease, Interest Expense Increase Statement(s) Balance Sheet and Income Statement How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Balance Sheet Income Statement Stockholders' Net Assets = Liabilities + Equity Revenues – Expenses = Income 4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.15MCE

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Present Value of $1 PV of Annuity of $1

Issuance of a Bond at Face Value

On January 1, 2017, Whitefeather Industries issued 900, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar.

Required:

1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar.

3. Identify and analyze the effect of the payment of interest on July 1, 2017.

Activity	Operating
Accounts	Cash Decrease, Interest Expense Increase
Statement(s)	Balance Sheet and Income Statement

How does this entry affect the accounting equation?

If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet		Income Statement
					Stockholders'		Net
Assets	=	Liabilities	+	Equity	Revenues	–	Expenses	=	Income

4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar.

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