Reporting Financial Statement Effects of Bond Transactions (…
Reporting Financial Statement Effects of Bond Transactions (FSET) On January 1, McKeown, Inc., issued $450,000 of 8%, 9-year bonds for $397,397, yielding a market ( yield) rate of 10%. Semiannual interest is payable on June 30 and December 31 of each year. a. Show computations to confirm the bond issue price. ● Note: Round your answers to the nearest whole dollar. Amount Present value of principal repayment ${#1} Present value of interest payments ${#2} Selling price of bonds b. Record the bond issuance, semiannual interest payment, and discount amortization on June 30, and semiannual interest payment and discount amortization on December 31, using the financial statement effects template. Use the effective interest rate method. ● Note: Use negative signs with your answers, when appropriate. ● Note: Select “N/A” as your answer if a part of the accounting equation is not affected. ● Note: Round your answers to the nearest whole dollar. Balance Sheet Income Statement Cash Noncash Contra Contrib. Earned Net Transaction Asset + Assets = Liabilities – Liability + Capital + Capital Revenue – Expenses = Income Jan. 1: Bond issuance. {#3} {#4} {#5} {#6} {#7} {#8} {#9} {#10} {#11} {#12} {#13} Jun. 30: Interest payment. {#14} {#15} {#16} {#17} {#18} {#19} {#20} {#21} {#22} {#23} {#24} Dec. 31: Interest payment. {#25} {#26} {#27} {#28} {#29} {#30} {#31} {#32} {#33} {#34} {#35}