Journal entries for bonds
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On January 1, 2010, Parabolic Company issued 8% bonds with a face amount of $72.9 million, dated
January 1. The bonds mature in 2025 (15 years). The market yield for bonds of similar risk and maturity
is 10%. Interest is paid semiannually.
Required:
1. Assume the market rate was 7%. Determine the price of the bonds at January 1, 2010, and prepare
the journal entry to record their issuance by Parabolic.
2. Using the original information provided, determine the price of the bonds at January 1, 2010, and
prepare the journal entry to record their issuance by Parabolic.
3. Assume Linear Networks, Inc. purchased the entire issue in a private placement of the bonds. Using
the data in Requirement 1, prepare the journal entry to record their purchase by Linear Networks.
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Solution Summary
The solution explains how to calculate bond price and make the journal entry for bond issuance
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