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Calculate the issue price of bonds, prepare adjusting entry

1. BE14-1 Ghostbusters Corporation issues $300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

Don't need to do this one - (BE14-2 The Goofy Company issued $200,000 of 10% bonds on January 1, 2008. The bonds are due January 1, 2013, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Goofy's journal entries for (a) the January issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.)
2. BE14-3 Assume the bonds in BE14-2 were issued at 98. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Goofy Company records straight-line amortization annually on December 31.

3. BE21-3 Rick Kleckner Corporation recorded a capital lease at $200,000 on January 1, 2008. The interest rate is 12%. Kleckner Corporation made the first lease payment of $35,947 on January 1, 2008. The lease requires eight annual payments. The equipment has a useful life of 8 years with no salvage value. Prepare Kleckner Corporation's December 31, 2008, adjusting entries.

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1. BE14-1 Ghostbusters Corporation issues $300,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.

300,000 X .10 X ½ = 15,000 Incorrect

We need to calculate how much the bonds have been issued by using the formula as follows: -

where B is the issued price
C is the coupon payment
r is the market rate
n is the period

Then, we can replace the information into the equation. Coupon payment is equal to $300,000 x 9% = 27,000/2 = 13,500)

The issued price of the bond is equal to

B = 13,500 x [1 - 1 ] + 300,000
(1.05)20 (1.05)20
0.05

B = 13,500 x 12.4622 + 300,000 x 0.3769
B = 281,310

Don't need to do this one - (BE14-2 The Goofy Company issued $200,000 of 10% bonds on January 1, 2008. The ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to compute bond price and prepare adjusting entries.

$2.19