On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,
ID: 2458524 • Letter: O
Question
On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% .386 Present value of 1 for 10 periods at 12% .322 Present value of 1 for 20 periods at 5% .377 Present value of 1 for 20 periods at 6% .312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Calculate the issue price of the bonds. Issue price of bond $ LINK TO TEXT Without prejudice to your solution in part (a), assume that the issue price was $2,652,000. Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method. Date Cash Expense Amortization Carrying Amount 1/1/15 $ 6/30/15 12/31/15
Explanation / Answer
(a) Issue price of the bond = $2655902.36
Starting Balance Principal Interest Ending Balance 1 3000000 ($90,727.76) ($150,000.00) $2,909,272.24 2 2909272.238 ($95,264.15) ($145,463.61) $2,814,008.09 3 2814008.089 ($100,027.36) ($140,700.40) $2,713,980.73 4 2713980.732 ($105,028.72) ($135,699.04) $2,608,952.01 5 2608952.007 ($110,280.16) ($130,447.60) $2,498,671.85 6 2498671.845 ($115,794.17) ($124,933.59) $2,382,877.68 7 2382877.676 ($121,583.88) ($119,143.88) $2,261,293.80 8 2261293.798 ($127,663.07) ($113,064.69) $2,133,630.73 9 2133630.727 ($134,046.23) ($106,681.54) $1,999,584.50 10 1999584.501 ($140,748.54) ($99,979.23) $1,858,835.96 11 2382877.676 ($147,785.96) ($92,941.80) $2,235,091.71 12 2235091.713 ($155,175.26) ($85,552.50) $2,079,916.45 13 2079916.451 ($162,934.02) ($77,793.74) $1,916,982.43 14 1916982.427 ($171,080.73) ($69,647.04) $1,745,901.70 15 1745901.701 ($179,634.76) ($61,093.00) $1,566,266.94 16 1566266.939 ($188,616.50) ($52,111.26) $1,377,650.44 17 1377650.439 ($198,047.33) ($42,680.44) $1,179,603.11 18 1179603.113 ($207,949.69) ($32,778.07) $971,653.42 19 971653.422 ($218,347.18) ($22,380.59) $753,306.25 20 753306.246 ($229,264.53) ($11,463.23) $524,041.71Related Questions
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