3. The market interest rate is 5% and the bonds issue at a premium. F of 1, PV o

Question

3. The market interest rate is 5% and the bonds issue at a premium. F of 1, PV of 1 FVA of 1, and P of $1 Use appropriate factor(s) from the tables provided. Do not round interest rate factors.) 1,000,000 Required Information The following information applies to the questions displayed below Date Cash Paid Interest Decrease in 0101/18 06/30/18 12/31/18 Expense Carrying ValueCarrying Value 1,104,609 1,102,224 1,099,780 Coney Island Entertainment issues $1,000,000 of 6% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. 2,385 30,000 27,556 2,444 Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: ReferenceseBook&Resources; Learning Objective: 09-05 Determine the price of a bond issue. Difficulty: 2 Medium Learning Objective: 09-06 Account for the issuance of bonds.

Explanation / Answer

Principal 1,000,000 interest 30000 Calculation of bond issue price Where i= 2.50% t= 30 years principal * PV of $1 at 2.5% for 30 yrs = 1,000,000 * 0.47674        =              476,740 interest * PV of ordinary annuity at 5%= 30000 * 20.93029 =              627,909 bond issue price          1,104,649 so present value of the face amount              476,740 present value of the semi-annual interest payments              627,909 price received for bonds          1,104,649

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