Question

hartford research issues bonds dated january 1 that pay interest semiannually on june 30 and december 31. the bonds have a $21,000 par value and an annual contract rate of 10%, and they mature in 10 years. (table b.1 (opens in a new tab), table b.2 (opens in a new tab), table b.3 (opens in a new tab), and table b.4 (opens in a new tab)) note: use appropriate factor(s) from the tables provided. round all table values to 4 decimal places, and use the rounded table values in calculations. complete this question by entering your answers in the tabs below. required 1a required 1b required 2a required 2b required 3a required 3b prepare the journal entry to record their issuance, if the market rate at the date of issuance is 8%. view transaction list journal entry worksheet 1 record the issue of bonds with a par value of $21,000 on january 1. assume that the market rate of interest at the date of issue is 8%. note: enter debits before credits. date general journal debit credit january 01 record entry clear view general journal

Explanation:

Step1: Calculate semiannual interest payment

Semiannual interest = Par value × $\frac{\text{Annual contract rate}}{2}$
$\$21,000 \times \frac{10\%}{2} = \$1,050$

Step2: Define bond parameters

• Number of periods ($n$) = $10 \times 2 = 20$
• Semiannual market rate ($r$) = $\frac{8\%}{2} = 4\%$

Step3: Find present value factors

• Present value of 1 factor (4%, 20 periods): $0.4564$
• Present value of annuity factor (4%, 20 periods): $13.5903$

Step4: Calculate PV of par value

PV of par = $\$21,000 \times 0.4564 = \$9,584.40$

Step5: Calculate PV of interest payments

PV of interest = $\$1,050 \times 13.5903 = \$14,269.82$

Step6: Compute bond issuance price

Issuance price = $\$9,584.40 + \$14,269.82 = \$23,854.22$

Step7: Calculate premium on bonds

Premium = $\$23,854.22 - \$21,000 = \$2,854.22$

Answer:

Date	General Journal	Debit	Credit
	Premium on Bonds Payable		$\$2,854.22$
	Bonds Payable		$\$21,000.00$