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On January 2, year 1, Parker Co. issued 6% bonds with a face value of $400,000...

On January 2, year 1, Parker Co. issued 6% bonds with a face value of $400,000 when the market interest rate was 8%. The bonds are due in ten years, and interest is payable every June 30 and December 31. Parker does not elect the fair value option for reporting its financial liabilities.

Use the following present value and present value annuity tables to calculate the selling price of the bond on January 2, year 1. Round your final answer to the nearest dollar.

Present Value Ordinary Annuity of $1
Periods 3% 4% 6% 8% 12% 16%
5 periods 4.5797 4.4518 4.2124 3.9927 3.6048 3.2743
10 periods 8.5302 8.1109 7.3601 6.7101 5.6502 4.8337
20 periods 14.8775 13.5903 11.4699 9.8181 7.4694 5.9288
Present Value of $1
Periods 3% 4% 6% 8% 12% 16%
5 periods .8626 .8219 .7473 .6806 .5674 .4761
10 periods .7441 .6756 .5584 .4632 .3220 .2267
20 periods .5537 .4564 .3118 .2145 .1037 .0514
Selling price of the bond

  

Prepare the amortization schedule for the bond through December 31, year 1. Round all numbers to the nearest dollar.

Date Interest paid Interest expense Amortization of discount Discount on bond payable Carrying value of bond payable
1/2/Y1
6/30/Y1
12/31/Y1

Solutions

Expert Solution

Amount PV Factor PV
Present Value of Face Amount $        400,000 0.4564 $         182,560
Present Value of semi-annual interest $          12,000 13.5903 $         163,084
Price of the Bonds $         345,644
Date Interest paid Interest expense Amortization of discount Discount on bond payable Carrying value of bond payable
1/2/Y1 $          54,356 $            345,644
6/30/Y1 $            12,000 $         13,826 $                1,826 $          52,530 $            347,470
12/31/Y1 $            12,000 $         13,899 $                1,899 $          50,631 $            349,369

ekkarill92 answered 2 years ago
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