The Bradford Company issued 12% bonds, dated January 1, with a face amount of $92 million on January 1, 2018. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and 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:1. Determine the price of the bonds at January 1, 2018.2. to 4. Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2018 (at the effective rate).

1. Determine the price of the bonds at January 1, 2018.

bonds' market price = PV of face value + PV of coupon payments

PV of face value = $92,000,000 / 1.07²⁰ = $23,774,548

PV of coupon payments = $5,520,000 x 10.594 (PV annuity factor, 7%, 20 periods) = $58,478,880

bonds' market price at issuance = $82,253,428

2. to 4. Prepare the journal entry to record their issuance by The Bradford Company on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2018 (at the effective rate).

January 1, 2018, bonds are issued at a discount

Dr Cash 82,253,428

Dr Discount ob bonds payable 9,746,572

    Cr Bonds payable 92,000,000

June 30, 2018, first coupon payment

Dr Interest expense 5,757,740

    Cr Cash 5,520,000

    Cr Discount on bonds payable 237,740

(82,253,428 x 7%) - 5,520,000 = 237,740

December 31, 2018, second coupon payment

Dr Interest expense 5,774,382

    Cr Cash 5,520,000

    Cr Discount on bonds payable 254,382

(82,491,168 x 7%) - 5,520,000 = 254,382

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