Question

Myriad Solutions, Inc. issued 12% bonds, dated January 1, with a face amount of $490 million on January 1, 2021, for $438,089,694. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest is paid semiannually on June 30 and December 31.

Required:
Calculate the amounts related to the bonds that Myriad would report in its financial statements. (Round your answers to the nearest whole dollar.)

Net Liability = _____

Financing = _____

Answer 1

As the face value > Issue price , the bond have been issued at discount

discount = $490,000,000-$438,089,694

=$51,910,306

Period end	cash interest paid [Issue price*bond interest rate/2]semi annual payment	Bond interest expense [Carrying value*market rate/2]	Discount amortization	carrying value
01/01/2021			$51,910,306	$438,089,694
30/06/2021	$29,400,000[$490,000,000*6%]	$30,666,279[$438,089,694*(14%/2)]	$1,266,279[$29,400,000-30,666,279]	$439,355,973[$438,089,694+$1,266,279]
31/12/2021	$29,400,000[$490,000,000*6%]	$30,754,918[$439,355,973*7%]	$1,354,918[$30,754,918-29,400,000]	$440,710,891[$439,355,973+1,354,918]
	Interest paid $58,800,000	Interest expense $61,421,197

Net liability as on 31/12/2021 =$440,710,891

Balance sheet
Net liability	$440,710,891
Income statement
Interest expense	$61,421,197
Statement of cash flow
Operating	($58,800,000)	Interest paid
Investing	-
Financing	$438,089,694	Cash received from issue of bond

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