The notes to the Helping Ltd. financial statements reported the following data o

Question

The notes to the Helping Ltd. financial statements reported the following data on December 31, Year 1 (end of the fiscal year): (Click the icon to view the financial statement data) Helping Ltd. amortizes bond discount by the effective-interest method and pays all interest amounts at December31 Read the requirements Requirement 1. Assume the market interest rate on January 1 of year 1, the date of issuance of the bonds, is 6%. Answer the following questions about Helping Ltd's long-term liabilities: (Round your answers to the nearest whole dollar)

Explanation / Answer

Q1)

a) Issue Price of the Bond = pv(rate, nper,pmt,fv)

Nper  (indicates the period) = 8

PV (indicates the price) = ?

PMT (indicate the annual cash interest payment) = 7000000*3% = 210000

FV (indicates the Maturity value) = 7000000

Rate (indicates YTM) = 10%

Issue Price of the Bond = pv(10%,8,210000,7000000)

Issue Price of the Bond = $ 4,385,886

b) Maturity value = $ 7,000,000

c) Annual cash interest payment = Face Value*Coupon Rate

Annual cash interest payment = 7000000*3%

Annual cash interest payment = 210000

d) Carrying Amount at December 31 Year 1 = Issue Price + Discount Amortised

Carrying Amount at December 31 Year 1 = 4,385,886 + (4,385,886*10% - 210000)

Carrying Amount at December 31 Year 1 =$ 4,614,475

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