Answer:
A. 17,682,634
B. Dr Cash 17,682,634
Dr Discount on Bonds Payable 2,517,366
Cr Bonds Payable 20,200,000
C. 6/30/2018
Dr Interest Expense 884,132
Cr Discount on Bonds Payable 76,132
Cr Cash 808,000
D. 12/31/2018
Dr Interest Expense 887,938
Cr Discount on Bonds Payable 79,938
Cr Cash 808,000
Explanation:
a. Calculation to Determine the price of the bonds at January 1, 2018
.
Using financial calculation to Determine the price of the bonds
First step is to calculate the principle using financial Calculator
Face value=20,200,000
N=20
I=5
PMT=0
CPT PV=7,613,168
Second step is to calculate the interest
N=20
I=5
PMT=(20,200,000*8%*(6/12))=808,000
FV=0
(CPT PV=10,069,466)
Now let calculate the price of the bonds
Price of the bonds =7,613,618+10,069,466
Price of the bonds =17,682,634
Therefore the price of the bonds at January 1, 2018 will be 17,682,634
b. Preparation of the journal entry to record the bond issuance by Bishop on January 1, 2018.
1/1/2018
Dr Cash 17,682,634
Dr Discount on Bonds Payable 2,517,366
(20,200,000-17,682,634)
Cr Bonds Payable 20,200,000
c. Preparation of the journal entry to record interest on June 30, 2018, using the effective interest method.
6/30/2018
Dr Interest Expense 884,132
(17,682,634*10%*(6/12))
Cr Discount on Bonds Payable 76,132
(884,132-808,000)
Cr Cash 808,000
(20,200,000*8%*(6/12))
d. Preparation of the journal entry to record interest on December 31, 2018, using the effective interest method.
12/31/2018
Dr Interest Expense 887,938
[17,682,634 - 76,132*10%*(6/12)]
Cr Discount on Bonds Payable 79,938
(887,938-808,000)
Cr Cash 808,000
(20,200,000*8%*(6/12))
