On January 1, 2024, NFB Visual Aids issued $900,000 of its 20-year, 6% bonds. The bonds were priced to yield 8%. Interest is payable semiannually on June 30 and December 31. NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2024, the fair value of the bonds was $730,000 as determined by their market value in the over-the-counter market. General (risk-free) interest rates did not change during 2024. Questions: 1-a. Determine the price of the bonds at January 1, 2024. 1-b to 4. Prepare the necessary journal entries.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
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On January 1, 2024, NFB Visual Aids issued $900,000 of its 20-year, 6% bonds.

  • The bonds were priced to yield 8%.
  • Interest is payable semiannually on June 30 and December 31.
  • NFB Visual Aids records interest expense at the effective rate and elected the option to report these bonds at their fair value.
  • On December 31, 2024, the fair value of the bonds was $730,000 as determined by their market value in the over-the-counter market.
  • General (risk-free) interest rates did not change during 2024.

Questions:

1-a. Determine the price of the bonds at January 1, 2024.

1-b to 4. Prepare the necessary journal entries.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

 

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