Duval Co. issues four-year bonds with a $111,000 par value on June 1, 2015, at a
ID: 2593358 • Letter: D
Question
Duval Co. issues four-year bonds with a $111,000 par value on June 1, 2015, at a price of $106,880. The annual contract rate is 8%, and interest is paid semiannually on November 30 and May 31.
Prepare an amortization table for these bonds. Use the straight-line method of interest amortization. (Round your answers to the nearest dollar amount.)
1.Prepare an amortization table for these bonds. Use the straight-line method of interest amortization. (Round your answers to the nearest dollar amount.)
Explanation / Answer
Par value of the Bonds $111,000 issue price of the Bonds $106880 Discount $4120 Number of periods Interest payable =2*4 years =8 periods Amortisation of Discount under straightline method per Period =$4120/8 =$515 Interst payable per period =$111,000*8% *1/2=$4440 Semi annual period End Interest payable at 8% per anum Amortised Discount Unamortised Discount (Opening carrying value - Amortised Discount per period) Carrying value of bonds (Opening carrying value+Amortised discount) 06/01/2015 $ 4,120.00 $ 1,06,880.00 11/30/2015 $4440 $ 515.00 $ 3,605.00 $ 1,07,395.00 06/01/2016 $4440 $ 515.00 $ 3,090.00 $ 1,07,910.00 11/30/2016 $4440 $ 515.00 $ 2,575.00 $ 1,08,425.00 06/01/2017 $4440 $ 515.00 $ 2,060.00 $ 1,08,940.00 11/30/2017 $4440 $ 515.00 $ 1,545.00 $ 1,09,455.00 06/01/2018 $4440 $ 515.00 $ 1,030.00 $ 1,09,970.00 11/30/2018 $4440 $ 515.00 $ 515.00 $ 1,10,485.00 05/31/19 $4440 $ 515.00 $ - $ 1,11,000.00
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