Final Exam Need ASAP On January 1, 2015, Piper Co. issued ten-year bonds with a
ID: 2495508 • Letter: F
Question
Final Exam Need ASAP
On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Without prejudice to your solution in part (a), assume that the issue price was $2,652,000. Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method.
Final Exam Need ASAP
On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Explanation / Answer
Part I :
Issue Price of the bonds:
Present Value of bond's Interest payments = 150000 x Present value of annuity for 20 periods at 6%
= 150000 x 11.470
= $1720500
Present Value of Bond's Maturity Amount = 3000000 x Present value of 1 for 20 periods at 6%
= 3000000 x 0.312
= $936000
Issue Price of the bonds = 1720500 + 936000
= $2626500
Part II:
Amortization Table
A B C D E F G Date Interest Payment Interest Expense Mkt 6% x Previous BV in G Amortization of Bond discount C - B Debit Balance in the account Bond Discount Credit Balance in the Account Bonds Payable Book Value of the Bonds F - E 1/1/15 348000 3000000 2652000 6/30/15 150000 159120 9120 338880 3000000 2661120 12/31/15 150000 159667 9667 329213 3000000 2670787Related Questions
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