Park Corporation is planning to issue bonds with a face value of $630,000 and a coupon...

Park Corporation is planning to issue bonds with a face value of $630,000 and a coupon rate of 7.5 percent. The bonds mature in 4 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)

3. What bond payable amount will Park report on its June 30 balance sheet? (Enter all amounts with a positive sign.)

Expert Solution

Answer:

Face Value of Bonds = $630,000

Annual Coupon Rate = 7.50%
Semiannual Coupon Rate = 3.75%
Semiannual Coupon = 3.75% * $630,000
Semiannual Coupon = $23,625

Time to Maturity = 4 years
Semiannual Period = 8

Annual Interest Rate = 8.50%
Semiannual Interest Rate = 4.25%

Issue Price of Bonds = $23,625 * PVA of $1 (4.25%, 8) + $630,000 * PV of $1 (4.25%, 8)
Issue Price of Bonds = $23,625 * 6.6638 + $630,000 * 0.7168
Issue Price of Bonds = $609,016

ekkarill92 answered 2 years ago

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