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What is the book value of liability on the day of the issue

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Reference no: EM132672603

On January 1, 2011, Weimin Inc. issued three-year 4.5% bonds with a face value of $100,000. Coupon interests are payable annually on December 31. The effective interest rate is 5%.

Present value interest factor of $1 per period at i% for 3 periods, PVIF(i,n).

Period

1%-.971
2%- .942
3%- .915
4%-.889
5%- .864
6%-.840
7%- .816
8%- .794
9%- .772
10%- .751

Present value interest factor of an (ordinary) annuity of $1 per period at i% for 3 periods, PVIFA(i,n).

Period

1%- 2.941
2%- 2.884
3%-2.829
4%- 2.775
5%- 2.723
6%- 2.673
7%-2.624
8%-2.577
9%- 2.531
10%- 2.487

Required: (Must show calculations. Round to the nearest dollar.)

Problem 1. Compute bond issue price.

Problem 2. Complete the amortization table from issuance to maturity.

Problem 3. Assume there is no issue cost. Use a journal entry to record the bond issue. How much is the book value of liability on issue day?

Journal Entry:

Book Value of Liability =

Problem 4. What is the book value of liability on Dec 31, 20x1? What is interest expense for the year ended Dec 31, 20x1? (assume effective interest method is used)

Book value of liability =

Interest expense =

Problem 5. Use a journal entry to record interest expense on Dec 31, 20x1.

Problem 6. In the above problem, assume issue cost of $1,000 was incurred. What is the book value of liability on the day of the issue?

Reference no: EM132672603

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