Questions 5-7(on Problem 9-3A Calculate the issue price of a bond and prepare am

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Questions 5-7(on Problem 9-3A Calculate the issue price of a bond and prepare amortization schedules (LO9-5,9-6) The following information applies to the questions displayed below Coney Island Entertainment issues $1,300,000 of 7% bonds, due in 15 years, with interest payatie semiannually on June 30 and Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: References Problem 9-3A Calculate the Issue price of a bond and prepare amortization schedules (L09-5,9-6 Section Break Required int 5. 1,00 points Problem 9-3A Part 18

Explanation / Answer

1. When bonds issued at face value, there will be no discount or premium to be amortised.

For the three dates:

Cash paid= Interest expense= 91000

Increase in carrying amount= 0

Carrying value= 1300000

2. Market interest rate is 8%

Calculation of issue price:

3. Market rate is 6%

Interest amount: Principle 1,300,000 Rate of interest 7% Frequency of payment(in months) 6 Interest amount 1300000*0.07*6/12= 45500

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