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-----------------------------------------------------------------------------------------------------------------------14-3.On February 1, 2016, Cromley Motor Products issued 12% bonds, dated
February 1, with a face amount of $85 million. The bonds mature on January 31,
2020 (4 years). The market yield for bonds of similar risk and maturity was 14%.
Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired
$85,000 of the bonds as a long-term investment. The fiscal years of both firms end
December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables provided.)
Required:
A) Determine the price of the bonds issued on February 1, 2016. (Enter your
answer in whole dollars.)
B) Prepare amortization schedules that indicate Cromleys effective interest
expense for each interest period during the term to maturity. (Enter your
answers in whole dollars.)
C) Prepare amortization schedules that indicate Barnwells effective interest
revenue for each interest period during the term to maturity. (Enter your
answers in whole dollars.)
D) Prepare the journal entries to record the issuance of the bonds by Cromley
and Barnwells investment on February 1, 2016. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.
Enter your answers in whole dollars.)
E) Prepare the journal entries by both firms to record all subsequent events
related to the bonds through January 31, 2018. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.
Enter your answers in whole dollars.)