On February 1, 2016, Cromley Motor Products issued 6% bonds,dated February 1, with a face amount of $80 million. The bondsmature on January 31, 2020 (4 years). The market yield for bonds ofsimilar risk and maturity was 8%. Interest is paid semiannually onJuly 31 and January 31. Barnwell Industries acquired $80,000 of thebonds as a long-term investment. The fiscal years of both firms endDecember 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)
Required: 1. Determine the price of the bonds issued on February 1, 2016.(Enter your answer in whole dollars.)
2.1 Prepare amortization schedules that indicate Cromleyâs effectiveinterest expense for each interest period during the term tomaturity. (Enter your answers in wholedollars.)
2.2 Prepare amortization schedules that indicate Barnwellâseffective interest revenue for each interest period during the termto maturity. (Enter your answers in wholedollars.)
3. Prepare the journal entries to record the issuance of the bondsby Cromley and Barnwellâs investment on February 1, 2016.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Enter youranswers in whole dollars.)
Record the issuance of the bonds by Cromley.
Record the Bond investment by Barnwell.
On February 1, 2016, Cromley Motor Products issued 6% bonds,dated February 1, with a face amount of $80 million. The bondsmature on January 31, 2020 (4 years). The market yield for bonds ofsimilar risk and maturity was 8%. Interest is paid semiannually onJuly 31 and January 31. Barnwell Industries acquired $80,000 of thebonds as a long-term investment. The fiscal years of both firms endDecember 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)
| Required: | |
| 1. | Determine the price of the bonds issued on February 1, 2016.(Enter your answer in whole dollars.) |
| 2.1 | Prepare amortization schedules that indicate Cromleyâs effectiveinterest expense for each interest period during the term tomaturity. (Enter your answers in wholedollars.) |
| 2.2 | Prepare amortization schedules that indicate Barnwellâseffective interest revenue for each interest period during the termto maturity. (Enter your answers in wholedollars.) |
| 3. | Prepare the journal entries to record the issuance of the bondsby Cromley and Barnwellâs investment on February 1, 2016.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Enter youranswers in whole dollars.) |
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Record the Bond investment by Barnwell. |
Related questions
The Bradford Company issued 12% bonds, dated January 1, with aface amount of $90 million on January 1, 2016. The bonds mature onDecember 31, 2025 (10 years). For bonds of similar risk andmaturity, the market yield is 14%. Interest is paid semiannually onJune 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) (Use appropriate factor(s) fromthe tables provided.) |
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| 1. | Determine the price of the bonds at January 1, 2016.(Enter your answers whole dollars.) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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