were issued at a market (effective) interest rate of 10%, resulting in Chin rece

Question

were issued at a market (effective) interest rate of 10%, resulting in Chin receiving cash of $26,149,750. 1. Issuance of the bonds 2. First interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest doliar.) willing to pay the ful face amount of the bonds. the contract rate of interest. Therefore, inventors

Explanation / Answer

Interest 1224000 (27200000*9%*6/12) At maturity 27200000 Present value annuity 7.72173 (n=10, i= 5%) Present value factor 0.61391 Interest present value 9451398 16698352 Carrying value 26149750 (9451398+16698352) Effective interest rate 4.50% 5% Year Cash paid Interest expense Discount amortized Discount on bonds bal. Carrying amount At issue 1050250 26149750 30-06-2017 1224000 1307487 83487 966763 26233237 31-12-2017 1224000 1311662 87662 879101 26320899 30-06-2018 1224000 1316045 92045 787056 26412944 01-Jan-17 Cash 26149750 Discount on bonds 1050250            Bonds payable 27200000 2 30-06-2017 Interest expense 1307487              Discount on bonds 83487              Cash 1224000 31-12-2017 Interest expense 1311662              Discount on bonds 87662              Cash 1224000 3 Interest expense 2619149 (1307487+1311662) 4 Market interest rate is more than contract rate Investor are not willing to pay the full amount

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