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On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when...

On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when the market rate was 2% for a cash price of $4,994 million. Interest was payable semi-annually on Dec. 31 and June 30. ABC also issued $3,527 million face value, 20-year, zero coupon bonds on July 1, 2017 that mature June 30, 2037 for a cash price of $2,619 million. The effective market interest rate at issuance was 1.5%. ABC repurchased $1,143 million face value coupon bonds on June 30, 2020 for $1,220 million cash (after interest was paid) and $582 million in face value of the zero- coupon bonds on June 30, 2021 for a purchase price of $432 million cash. 2. Prepare amortization schedules for both bond issuances. Note interest is semi- annual for the coupon bonds and you may assume annual for the zero- coupon bonds. Use the effective interest method. Please show calculation for each component.

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1) On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when the market rate was 2% for a cash price of $4,994 million. Interest was payable semi-annually on Dec. 31 and June 30.
Amount in millions
A B C D E F G
Period Interest Payment = 3%/2 x face value Interest Expenses ((2%/2 x book value of bond Prev. yr Amortization of Bonds Premium (B-c) Credit Balance in bonds Premium Account Credit Bal in Bonds Payable Book Value of Bonds F+ E
0 $     420.00 $  4,574.00 $  4,994.00
1 $       68.61 $       49.94 $       18.67 $     401.33 $  4,574.00 $  4,975.33
2 $       68.61 $       49.75 $       18.86 $     382.47 $  4,574.00 $  4,956.47
3 $       68.61 $       49.56 $       19.05 $     363.43 $  4,574.00 $  4,937.43
4 $       68.61 $       49.37 $       19.24 $     344.19 $  4,574.00 $  4,918.19
5 $       68.61 $       49.18 $       19.43 $     324.76 $  4,574.00 $  4,898.76
6 $       68.61 $       48.99 $       19.62 $     305.14 $  4,574.00 $  4,879.14
7 $       68.61 $       48.79 $       19.82 $     285.32 $  4,574.00 $  4,859.32
8 $       68.61 $       48.59 $       20.02 $     265.31 $  4,574.00 $  4,839.31
9 $       68.61 $       48.39 $       20.22 $     245.09 $  4,574.00 $  4,819.09
10 $       68.61 $       48.19 $       20.42 $     224.67 $  4,574.00 $  4,798.67
11 $       68.61 $       47.99 $       20.62 $     204.05 $  4,574.00 $  4,778.05
12 $       68.61 $       47.78 $       20.83 $     183.22 $  4,574.00 $  4,757.22
13 $       68.61 $       47.57 $       21.04 $     162.18 $  4,574.00 $  4,736.18
14 $       68.61 $       47.36 $       21.25 $     140.93 $  4,574.00 $  4,714.93
15 $       68.61 $       47.15 $       21.46 $     119.47 $  4,574.00 $  4,693.47
16 $       68.61 $       46.93 $       21.68 $       97.80 $  4,574.00 $  4,671.80
17 $       68.61 $       46.72 $       21.89 $       75.90 $  4,574.00 $  4,649.90
18 $       68.61 $       46.50 $       22.11 $       53.79 $  4,574.00 $  4,627.79
19 $       68.61 $       46.28 $       22.33 $       31.46 $  4,574.00 $  4,605.46
20 $       68.61 $       46.05 $       31.47 $       (0.00) $  4,574.00 $  4,574.00
2)
ABC also issued $3,527 million face value, 20-year, zero coupon bonds on July 1, 2017 that mature June 30, 2037 for a cash price of $2,619 million. The effective market interest rate at issuance was 1.5%.
Amount in millions
A B C D E F G
Period Interest Payment = 0% x face value Interest Expenses ((2% x book value of bond Prev. yr Amortization of Bonds discount (B-c) Credit Balance in bonds Discount Account Credit Bal in Bonds Payable Book Value of Bonds F- E
0 $     908.00 $  3,527.00 $  2,619.00
1 $            -    $       52.38 $     (52.38) $     855.62 $  3,527.00 $  2,671.38
2 $            -    $       53.43 $     (53.43) $     802.19 $  3,527.00 $  2,724.81
3 $            -    $       54.50 $     (54.50) $     747.70 $  3,527.00 $  2,779.30
4 $            -    $       55.59 $     (55.59) $     692.11 $  3,527.00 $  2,834.89
5 $            -    $       56.70 $     (56.70) $     635.41 $  3,527.00 $  2,891.59
6 $            -    $       57.83 $     (57.83) $     577.58 $  3,527.00 $  2,949.42
7 $            -    $       58.99 $     (58.99) $     518.59 $  3,527.00 $  3,008.41
8 $            -    $       60.17 $     (60.17) $     458.42 $  3,527.00 $  3,068.58
9 $            -    $       61.37 $     (61.37) $     397.05 $  3,527.00 $  3,129.95
10 $            -    $       62.60 $     (62.60) $     334.45 $  3,527.00 $  3,192.55
11 $            -    $       63.85 $     (63.85) $     270.60 $  3,527.00 $  3,256.40
12 $            -    $       65.13 $     (65.13) $     205.47 $  3,527.00 $  3,321.53
13 $            -    $       66.43 $     (66.43) $     139.04 $  3,527.00 $  3,387.96
14 $            -    $       67.76 $     (67.76) $       71.29 $  3,527.00 $  3,455.71
15 $            -    $       69.11 $     (71.28) $         0.00 $  3,527.00 $  3,527.00

ekkarill92 answered 1 year ago
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