Ask Question
29 October, 04:09

On January 1, Applied Technologies Corporation (ATC) issued $550,000 in bonds that mature in 10 years. The bonds have a stated interest rate of 12 percent. When the bonds were issued, the market interest rate was 12 percent. The bonds pay interest once per year on December 31.

Required:

1. Determine the price at which the bonds were issued and the amount that ATC received at issuance.

2. & 3. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31 assuming no interest has been accrued earlier in the year.

+4
Answers (1)
  1. 29 October, 04:10
    0
    1. $550,000

    Explanation:

    1. It is given in the question that the stated interest rate and the market interest rate both are having the same rate, i. e, 12%.

    Hence, the bonds are issued at the face value that is $550,000.

    2. The Journal entries are as follows:

    (i) On January 1,

    Cash A/c Dr. $550,000

    To bonds payable $550,000

    (To record the bond issuance)

    (ii) On December 31,

    Interest Expense A/c Dr. $66,000

    To cash A/c $66,000

    (To record the first interest payment on December 31 assuming no interest has been accrued earlier in the year)

    Workings:

    Interest expense = $550,000 * 12%

    = $66,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “On January 1, Applied Technologies Corporation (ATC) issued $550,000 in bonds that mature in 10 years. The bonds have a stated interest ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers