Question

Requirement 1. How much cash did the company receive upon issuance of the bonds​ payable? ​(Use the factor tables provided with factors rounded to three decimal places. Round all currency amounts to the nearest whole​ dollar.) Upon issuance of the bonds​ payable, the company received ​$ nothing.

Answer 1

Missing information:

A lot of information is missing, but I found several examples with very similar requirements.

For example:

Company, Inc. issued $500,000 of 14%, 10-year bonds payable on January 1, 2018. The market interest rate at the date of issuance was 12%, and the bonds pay interest semiannually.

Answer:

In order to determine the market price of the bonds we must add the present value of the bonds' face value + present value of the coupon payments:

PV of face value = $500,000 / (1 + 6%)²⁰ = $155,902.36

PV of coupon payments = $35,000 x 11.470 (PV annuity factor, 6%, 20 periods) = $401,450

market value of the bonds = $557,352.36

The journal entry to record the issuance of the bonds:

January 1, 2018, bonds are issued at a premium

Dr Cash 557,352.36

Cr Bonds payable 500,000

Cr Premium on bonds payable 57,352.36