Determine the selling price of these bonds on January

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Reference no: EM132792190

Question - On January 1, 2020 Banana Inc. issued $3,000,000, 4%, 20 year bonds. Interest is payable annually with the first payment due on January 1, 2021.

Required -

a) Determine the selling price of these bonds on January 1, 2020, assuming a market rate of interest of 5%.

b) Prepare the journal entry on January 1, 2020 to record the issuance of the bonds.

c) Complete the effective interest amortization table for the first two interest payments of the bond (round all calculations to nearest dollar).

d) Assume the company's year-end is December 31, 2020. Prepare the 2020 year-end adjusting entry for the interest on the bonds.

e) Prepare the journal entry on January 1, 2021 for the interest payment.

f) Assume the bonds were redeemed for $3,030,000 on January 1, 2038. The bond's amortized cost was $2,944,000 after the January 1, 2038 interest payment was made and recorded.

Reference no: EM132792190

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