On June 30, 2014, the market interest ate is 7%. Score Sports Ltd. ss es $3,000,

Question

On June 30, 2014, the market interest ate is 7%. Score Sports Ltd. ss es $3,000,000 of 12%, 20-year bonds payable. The bonds pay interest on June 30 and December 31. Score Sports Ltd. amortizes bonds by the effective nterest method 1. Us the PV function in Excer to calculate the issue price of the bonds 2. 3. Prapara an amortization table for tha first four semiannual interest periods Record the issuance of bonds payable on Juna 30, 2014; the payment of interest onDecember 31, 2014; and the payment of interest on June 30, 2015 Requirement 1. Use the PV function in Exce to cakculate the issue price of the bonds. (Round your answer to the nearest whole dollar.) The issue price of the bonds is s Requirement 2. Prepare an amortization table for the first four semiannual interest periods Enter the issue date information, then complete the table for each of the following semiannual interest periods (Round your answers to the nearest whole dollar.) Score Sports Ltd. Amortization Table Interest Interest Premium mm Account Bond Carrying Interest Period Jun 30, 2014 Dec 31, 2014 Jun 30, 2015 Dec 31, 2015 Jun 30, 2016 Amortization Balance

Explanation / Answer

Principal 3,000,000 interest 180000 Market interest rate 4% periods to maturity 40 issue price 4,601,623 Calculation of bond issue price Where i= 3.50% t= 40 principal * PV of $1 at 3.5% for 40 yrs = 3,000,000 * 0.25257        =           757,710 interest * PV of ordinary annuity at 3.5%= 180000 * 21.35507 = 3,843,913 bond issue price 4,601,623 so present value of the face amount           757,710 present value of the semi-annual interest payments       3,843,913 price received for bonds       4,601,623 answer 2) A B C D E F Semiannual interest interes premium premium Bond intt payment expense amortization account carrying period 6% 3.50% balance amount 6/30/2014 1,601,623 4,601,623 12/31/2014 180000 161057 18943 1582679 4582679 6/30/2015 180000 160394 19606 1563073 4563073 12/31/2015 180000 159708 20292 1542781 4542781 6/30/2016 180000 158997 21003 1521778 4521778 3) Date Accounts   Debit Credit 6/30/2014 Cash 4,601,623 premium on bonds 1,601,623 Bonds payable 3,000,000 6/30/2015 Interest expense 161057 Premium on bonds 18943 cash 180000 12/31/2015 Interest expense 160394 Premium on bonds 19606 cash 180000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.