Time remaining: 4:54:49 [The following information applies to the questions disp
ID: 2519582 • Letter: T
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Time remaining: 4:54:49 [The following information applies to the questions displayed below. On January 1, 2018, White Water issues $570,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 6%, the bonds will issue at $612,403. value Required information 6.66 points Required: 1. Complete the first three rows of an amortization table. Date Cash Paid /30/18 12/31/18 HintsReferences eBook &Resources; ?nt.1 Check my workExplanation / Answer
Answer = 1) Calculation of Annual Coupon Payments Par value of the bond issued is = $5,70,000 Annual Coupon % 7.00% Annual Coupon Amount $39,900.00 Semi Annual Coupon Amount $19,950.00 Excess Value of the par value is taken = Issue Value $6,12,403 Less: Par Value $5,70,000 Difference $42,403 divide in No. of period = 10 Year X 2 = 20.00 Amortied per period = $ 42,403 / 20 = $2,120.15 Date Cash Paid Interest Expenses (Cash paid - Decrease in Carrying value) Decrease in Carrying Value Carrying Value 1/1/18 0 0 0 612403 06/30/18 $19,950.00 $17,829.85 $2,120.15 $6,10,282.85 12/31/18 $19,950.00 $19,950.00 $2,120.15 $6,08,162.70 Answer = 2) Calculation of Annual Coupon Payments Par value of the bond issued is = $4,10,000 Annual Coupon % 7.00% Annual Coupon Amount $28,700.00 Excess Value of the par value is taken = Issue Value $3,82,487 Less: Par Value $4,10,000 Difference $27,513 divide in No. of period = 10 Year 10.00 Amortied par period = $ 27,513 / 10 = $2,751.30 Date Cash Paid Interest Expenses (Cash paid + Increase in Carrying value) Increase in Carrying Value Carrying Value 1/1/18 0 0 0 $3,82,487 12/31/18 $28,700.00 $31,451.30 $2,751.30 $3,85,238.30 12/31/19 $28,700.00 $31,451.30 $2,751.30 $3,87,989.60
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