I NEED THE ANSWER WITHOUT USING A FINANCIAL CALCULATOR. See screenshot I ALSO NE
ID: 2491612 • Letter: I
Question
I NEED THE ANSWER WITHOUT USING A FINANCIAL CALCULATOR. See screenshot
I ALSO NEED THE CHART FILLED OUT.
Devon Harris Company sells 9% bonds having a maturity value of $2,275,000 for $2,275,000 for $2,028,982. The bonds are dated January 1, 2014, and mature January 1, 2019. Interest is payable annually on January 1. Determine the effective-interest rate. The effective-interest rate Set up a schedule of interest expense and discount amortization under the effective-interest method. (Round answers to a decimal places, e.g. 38,548.)Explanation / Answer
Effective interest rate = 12%
Since bonds are issued at discount so effective rate has to greater than stated interest
N = 5years
Face value 2,275,000 *.56743 = 1,290,903
Interest 204,750 *3.60478 = 738,079
Present value =2,028,982
Table
year
Interest paid
Interest expense@12%
Discount amortized
Carrying value of bonds
Jan 1 ,2014
2,028,982
Dec 31,2014
204,750
243,478
38,738
2,067,710
Dec 31,2015
204,750
248,125
43,375
2,111,085
Dec 31,2016
204,750
253,330
48,580
2,159,665
Dec 31,2017
204,750
259,160
54,410
2,214,075
Dec 31,2018
204,750
265,689
60,939
2,275,014
Effective interest rate = 12%
Since bonds are issued at discount so effective rate has to greater than stated interest
N = 5years
Face value 2,275,000 *.56743 = 1,290,903
Interest 204,750 *3.60478 = 738,079
Present value =2,028,982
Table
year
Interest paid
Interest expense@12%
Discount amortized
Carrying value of bonds
Jan 1 ,2014
2,028,982
Dec 31,2014
204,750
243,478
38,738
2,067,710
Dec 31,2015
204,750
248,125
43,375
2,111,085
Dec 31,2016
204,750
253,330
48,580
2,159,665
Dec 31,2017
204,750
259,160
54,410
2,214,075
Dec 31,2018
204,750
265,689
60,939
2,275,014
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