Assume that the following information is relevant for one of the bond issues of

Question

Assume that the following information is relevant for one of the bond issues of Manchester Company: On January 1, 2015, the amount the bends should sell for is The total amount of bond interest to be paid in cash over the life of the bonds is: The amount of interest expense for 2015 using the effective interest method of amortization is (show exact amount including cents) The bond carring value on the December 31, 2015 balance sheet (after paying and recording interest expense for 2015) is: (show exact amount including cents)

Explanation / Answer

N=5% ; t=40 years

Principal 900,000 *.142                   = 127,800

Interest 36,000 * 17.159                   =617,724

Total                                                     = 745,524 answer

(745,524 * 5%)                      = 37,276.20

(744,247.80*5%)                   =37,212.39

Total interest expense = 74,488.59

1. Amount of bonds

N=5% ; t=40 years

Principal 900,000 *.142                   = 127,800

Interest 36,000 * 17.159                   =617,724

Total                                                     = 745,524 answer

1. Bond interest 36,000 *40 = 1,440,000
2. Interest expense

(745,524 * 5%)                      = 37,276.20

(744,247.80*5%)                   =37,212.39

Total interest expense = 74,488.59

1. Carrying value $743,035.41

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