The Bradford Company sold 10% bonds, dated January 1, with a face amount of $75 million on January 1, 2011 to Saxton Bose Corporation. The bonds mature in 2020 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Use (Table 2) and (Table 4)

The Bradford Company sold 10% bonds, dated January 1, with a face amount of $75 million on January 1,

2011 to Saxton Bose Corporation. The bonds mature in 2020 (10 years). For bonds of similar risk and

maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.

Use (Table 2) and (Table 4)

Required:

(1) Prepare the journal entry to record the purchase of the bonds by SaxtonBose

on January 1, 2011.

(Enter your answers in dollars not in millions. Round "PV Factor" to 5 decimal places andfinal

answers to the nearest whole dollar amount. Omit the "$" sign in your response.)

Date General Journal Debit Credit

Jan 1,

2011 Bond investment 75,000,000 ± 0.01%

Discount on bond investment 8,602,800 ± 0.01%

Cash 66,397,200 ± 0.01%

(2) Prepare the journal entry to record interest revenue on June 30, 2011 (at the effective rate). (Enter your

answers in dollars not in millions. Round "PV Factor" to 5 decimal places andfinal answers to

the nearest whole dollar amount. Omit the "$" sign in your response.)

Date General Journal Debit Credit

June 30,

2011 Cash 3,750,000 ± 0 .01%

Discount on bond investment 233,832 ± 0 . 01%

Interest revenue 3,983,832 ± 0.01%

(3) Prepare the journal entry to record interest revenue on December 31, 2011 (at the effective rate). (Enter

your answers in dollars not in millions. Round "PV Factor" to 5 decimal places andfinal answers

to the nearest whole dollar amount. Omit the "$" sign in your response.)

Date General Journal Debit Credit

Dec. 31,

2011 Cash 3,750,000 ± 0 .01%

Discount on bond investment 247,862 ± 0 . 0 1%

Interest revenue 3,997,862 ± 0.01%

Explanation:

(1) January 1, 2011

Interest $ 3,750,000 ¥ × 11.46992* = $ 43,012,200

Principal $ 75,000,000 × .31180** = 23,385,000

Present value (price) of the bonds $ 66,397,200

¥ 5% × $75,000,000

* present value of an ordinary annuity of $1: n = 20, i = 6% (Table 4)

** present value of $1: n = 20, i = 6% (Table 2)

(2) June 30, 2011

Cash (5% × $75,000,000) = 3,750,000

Interest revenue (6% × $66,397,200) = 3,983,832

(3) December 31, 2011

Cash (5% × $75,000,000) = 3,750,000

Interest revenue (6% × [$66,397,200 + 233,832]) = 3,997,862