5. 3.90 points Exercise 10-3 Computing bond interest and price; recording bond i

Question

5. 3.90 points Exercise 10-3 Computing bond interest and price; recording bond issuance LO P2 Bringham Company issues bonds with a par value of $670,000 on their stated issue date. The bonds mature in 9 years and pay 10% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 12%. (Table B.1. Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. What is the amount of each semiannual interest payment for these bonds? Semiannual Rate Semiannual cash interest payment Par (maturity) value 670,000 5.0%) 33,500 2. How many semiannual interest payments will be made on these bonds over their life? Number of payments 18 3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. At par. At a premium. At a discount

Explanation / Answer

There are two different question. I have answered the first one

ans 1 Par (maturity) value Semi Annual Rate Semiannual cash interest payment $670,000 5% $33,500 = No of payments=(2*9)=18 ans 3 At a discount ans 4 Table value are based n 18 i 6% Cash flow Table value Amt Present value par value 0.3503 670000 234701 PVIF(6%,18) Interest 10.8276 33500 362725 PVIFA(6%,18) Price of the bonds 597426 ans 5 Trans General Journal Dr Cr 1 cash 597426 Discount on Bonds payable $72,574 Bonds Payable $670,000 (being issue of bonds recorded)

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