Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 201

Question

Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 2016. The market interest rate at the date of issuance was 10%, and the Apollo Corporation bonds pay interest semiannually. Apollo Corporation's year-end is March 31. Calculate the issue price of the bonds using the PV function in Microsoft® Excel®. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar. Record Apollo Corporation's issuance of the bonds on March 31, 2016, and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2016. Note. Explanations are not required. Show all calculations for your solution. * I need help on calculations* Can you direct me on how to calculate the issue price on an excel worksheet ?

Semiannual Interest : 560000 *.07 *6/12 = 19600

semiannual months : 12* 2 = 24

semiannual yield : 10*6/12 = 5%

Issue Price : [PVA 5%,24*interest ]+[PVF 5%,24*face value]

       =[13.79864*19600]   +[.31007*560000]

        =270453.34+ 173639.2

             = $ 444093 rounded **how do I enter on excel worksheet?

Explanation / Answer

Issue Price f Bonds: Present value of Interest for 24 periods at 5 % Annuity factor i.e. 13.7986 270453 Present value of fce value received at the end of 24 periods at PVF i.e.0.31007 173640 Issue Price f Bonds: 444093 Note: Semi Annual Interest: 560,000*7%*6/12 = 19600 Amortization table: Date Book value Interest Exp Cash Interest Discount Discount Book value of Bonds Bonds In beg at 5% at 3.5% Amortized Unamortized at the end Mar 31 2016 444093 115907 444093 Sep 30 2016 444093 22205 19600 2605 113302 446698 Mar 31 2017 446698 22335 19,600 2,735 110,567 449,433 Sep 30 2017 449433 22472 19,600 2,872 107,695 452,305 Journal Entries: For issuance: Mar 31,2016 Cash Account Dr. 444093 Discount on Bonds payable Dr. 115907      Bonds payable 560,000 (for issuance of bonds) For Interest payment: Sep 30,2016 Interest expense Dr. 22205      Cash Account 19600       Discount on bonds payable 2605

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.