PROBLEM AAA LANCE co 30 points On January 1 2017 Lan interes

PROBLEM AAA: LANCE co. (30 points) On January 1, 2017 Lan interest rate of 12% payable semiannually on July 1 and J 10% Present value table : ce Co. issued five-year bonds with a face value of s800.000 and a stated e factors are:nually on July I and January 1. The bonds were sold to yield Present value of 1 for 5 periods at 10% Present value of 1 for 5 periods at 12% Present value of l for 10 periods at 5% Presen .62092 56743 61391 55839 t value of 1 for 10 periods at 6% 3.79079 Present value of an ordinary annuity of 1 for 5 periods at 10% Present tee or an ordinary annuity of 1 for 5 periods at 12% Present value of an ordinary annuity of 1 for 10 periods at 5% value ofan ordinary annuity of 1 for lo periods at 6% 3.60478 7.72173 7.36009 rdin Calculate the issueprice of the bonds and prepare the journal entry for Lanee Co. K(30 points)

Solution

1. Issue Price of Bond = Interest * PVAF (10 , 5%) + Redemption * PVF (10 , 5%)

Issue Price of Bond = $48000 * 7.72173 + $800000 * 0.61391

Issue Price of Bond = $370643.04 + $491128

Issue Price of Bond = $861771.04

2. Journal Entry for Issue of Bond at Premium

Bonds Payable

Premium on Issue of Bonds

Date	General Journal	Debit	Credit
January 1 2017	Cash A/c	$861771.04
	Bonds Payable		$800000
	Premium on Issue of Bonds		$61771.04