Homework: Chapter 9 - HW Score: 0 of 1 pt S9-11 (similar to) Save 45 of 10 (8 co
ID: 2402165 • Letter: H
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Homework: Chapter 9 - HW Score: 0 of 1 pt S9-11 (similar to) Save 45 of 10 (8 complete) HW Score: 72.78%, 7.28 of 10 pts Question Help co en Corporation issued S640,000 of 5%, 15-year bonds payable on March 31, 2016 The market interest rate at the date of issuance was 10%, and the Cowen Corporation bonds pay interest semiannually. Cowen Corporation's year-end is March 31 1. Using the PV function in Exce calculate the issue price of the bonds 2. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar 3. Record Cowen Corporation's issuance of the bonds on March 31, 2016, and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2016. Explanations are not required 1. Using the PV function in Excel calculate the issue price of the bonds. (Round your answer to the nearest whole dollar.) The issue price of the bonds is s Enter any number in the edit fields and then click Check Answer parts Clear All Check Answer upExplanation / Answer
1) Issue price of bonds $ 3,94,041 Working: Par Value(fv) 6,40,000 Coupon rate 5% Life in years 15 Market interest rate 10% Semi annual coupon = 6,40,000 x 5% x 6/12 = 16,000 Semi annual periods = 2 x 15 = 30 Semi annual interest rate = 10% / 2 = 5% Issue price of bonds = =pv(rate,nper,pmt,fv) Where, = =pv(0.05,30,16000,640000) rate 5% = $ -3,94,041 nper 30 pmt 16,000 fv 6,40,000 2) Amortization table: Number of Interest payments Coupon interest Interest Expense Discount amortized Unamortized discount Carrying Value Face Value 0 $ 2,45,959 $ 3,94,041 6,40,000 1 16,000 $ 19,702 $ 3,702 $ 2,42,257 $ 3,97,743 6,40,000 2 16,000 $ 19,887 $ 3,887 $ 2,38,370 $ 4,01,630 6,40,000 3 16,000 $ 20,081 $ 4,081 $ 2,34,289 $ 4,05,711 6,40,000 3) Date Account titles Debit Credit March 31, 2016 Cash $ 3,94,041 Discount on bonds payable $ 2,45,959 Bonds Payable $ 6,40,000 September 30 2016 Interest expense $ 19,702 Cash 16,000 Discount on bonds payable $ 3,702 Working: Number of Interest payments Beginning Value x Interest rate = Interest Expense 1 $ 3,94,041 x 5% = $ 19,702 2 $ 3,97,743 x 5% = $ 19,887 3 $ 4,01,630 x 5% = $ 20,081
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