Question 21 Part 3 On July 1 2017 Pearl Limited issued bonds

Question 21, Part 3 On July 1, 2017 Pearl Limited issued bonds with a face value of $1,062,000 due in 20 years, paying interest at a face rate of 6% on January 1 and July 1 each year. The bonds were issued to yield 8%. The company\'s year-end was September 30. The company used the effective interest method of amortization. Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Your answer has been saved and sent for grading Prepare the journal entry to record the issue of the bonds. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No Entry\" for the account titles and enter O for the amounts. Round answers to o decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit July 1 Cash 1381560 Bonds Payable 1381560

Solution

Solution: Face Value of the Bond 1062000 Duration 20 Years Coupon Rate 6% Coupon paid Semi annually Coupon Amount 31860 Bond Yield 8% Annunity Factor 19.79277388 (4%,40) Present Value of Coupon Amount 630597.7758 Discounting Factor at the 40th Term @ 4% 0.208289045 Present value of the face value of the bond 221202.9653 Issue Price of the bond 851800.74 Journal Particulars Debit Credit Cash 851800.00 Discount on Issue of Bond 210200.00 Bonds Payable 1062000