Ujiri Ltd. authorized $300,000 of three-year bonds dated January 1, 2020. The stated rate on these bonds was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 2020, when the market rate of interest was 12%. Assume effective-interest amortization. Required: a) What amount will the bonds be issued for? (show your calculations) Prepare the journal entry to record the issuance of the bonds. b) Complete the following table: Bond Payment Schedule Date Interest Payment Interest Expense Amortization Carrying Amount Jan.1/20 June 30/20 Dec.31/20 June 30/21 Dec.31/21 June 30/22 Dec.31/22 Total

• Issue price of the bonds - $314,752

Step-by-step explanation

Part 1- Issuance of bonds

The requirement is to determine the selling price of the bonds.

To accomplish this objective, we simply sum together the present value of principal and the present value of interest payments.

The present value of principal is obtained by multiplying the face value of the bond by the present value of lump sum factor. This is because the principal of the bonds is not payable until the date of maturity.

Meanwhile, the present value of interest payments is obtained by multiplying the periodic interest payments by the present value of ordinary annuity factor. This is because unlike the principal, interest is payable in series.

Accordingly, the selling price of the bonds is determined as follows:

Please note that interest is payable semi-annually. Therefore, in computing the PV factors, the effective interest rate is divided by 2 (i.e. 12% / 2 = 6%) while the term is multiplied by 2 (i.e. 3 x 2 = 6).

The issuance is recorded as follows:

Part 2- Amortization Table

When bonds are issued above face value, a premium on bonds payable results. Technically, a premium on bonds payable is a gain on the part of the issuer because it represents the amount he was able to borrow but is not required to pay. However, such gain is not recognized outright. Instead, it is amortized over the life of the bonds as a reduction from interest expense.

The amortization table is prepared as follows:

Please see the attached file for the complete solution