The following information applies to the questions displayed below.] Coney Islan

Question

The following information applies to the questions displayed below.] Coney Island Entertainment issues $1,300,000 of 5% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:

The market interest rate is 6% and the bonds issue at a discount.

Issue Price: _______________

Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01 06/30 12/31

Explanation / Answer

Issue Price = pv(rate,nper,pmt,fv)

rate = 6%*1/2 =3%

nper = 15*2 = 30

pmt = 1300000*5%*1/2 = 32500

fv = 1300000

Issue Price = pv(3%,30,32500,1300000)

Issue Price = $ 1,172,597.13

Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01 1172597.13 06/30 32500                        35,177.91            2,677.91       1,175,275.04 12/31 32500                        35,258.25            2,758.25       1,178,033.29

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