12A. On December 31, 2018, when the market interest rate is 8%, Arnold Corporati

Question

12A. On December 31, 2018, when the market interest rate is 8%, Arnold Corporation issues $200,000 of 6%, 10-year bonds payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance (Click the icon to view Present Value of $1 table. (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Start by calculating the present value of the principal. (Enter factor amounts to three decimal places, X.XXX.) Value Factor PV of principal Now calculate the present value of the stated interest. (Enter factor amounts to three decimal places, X.XXX.) Value XSemiannual interest rate Factor PV of stated interest Finally, calculate the present value of bonds payable PV of principal + PV of stated interestPV of bonds payable Enter any number in the edit fields and then continue to the next question

Explanation / Answer

Market Rate of interest per semi-annual period = 4%
No. of semi-annual periods = 10 x 2 = 20

Present value of the principal

Present value of the stated interest

Present value of bonds payable

Value x Factor = PV of Principal $200000 x 0.456 = $91200

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