On June 30, 2018, Singleton Computers issued 6% stated rate bonds with a face am

Question

On June 30, 2018, Singleton Computers issued 6% stated rate bonds with a face amount of $100 million. The bonds mature on June 30, 2033 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (3.0%) on June 30 and December 31, beginning on December 31, 2018. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price of the bonds on June 30, 2018.
2. Calculate the interest expense Singleton reports in 2018 for these bonds using the effective interest method.

Explanation / Answer

1 As stated rate equals market rate, bonds will be selling at par value Price of the bonds = $100 million or $100000000 2 Interest expense = 100000000*3%= 3000000

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