Reference no: EM132487189
McWherter Instruments sold $620 million of 10% bonds, dated January 1, on January 1, 2021. The bonds mature on December 31, 2040 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Blanton Technologies, Inc., purchased $620,000 of the bonds as a long-term investment. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1). Use apprporiate factors in tables.
Required:
Question 1. Determine the price of the bonds issued on January 1, 2021. (REGARDING A)
a. Bond Price?
Question 2. Prepare the journal entries to record (a) their issuance by McWherter and (b) Blanton's investment on January 1, 2021. (REGARDING B)
b. 1- Record the issue of bonds payable by McWherter.
2- Record the bond investment by Blanton.
Question 3. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on June 30, 2021 (at the effective rate). (REGARDING C)
c. 1- Record the interest expense for McWherter.
2- Record the interest revenue for Blanton.
Question 4. Prepare the journal entries by (a) McWherter and (b) Blanton to record interest on December 31, 2021 (at the effective rate). (REGARDING D)
d. 1- Record the interest expense for McWherter.
2- Record the interest revenue for Blanton.
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