Question

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:

Required:
1. The market interest rate is 5% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round your answers to nearest whole dollar.)

Answer 1

Req 1
	Issue price			1,500,000
	Date	Cash	interest	increase in	CV
		paid	expense	CV
	1/1/2018				1,500,000
	6/30/2018	75,000	75000	0	1,500,000
	12/31/2018	75,000	75000	0	1,500,000
Working notes
Bond characterstics				Amount
Principal				1,500,000
interest				75,000
Market interest rate				5%
periods to maturity				20
issue price				1,500,000.0
Calculation of bond issue price
Where
i=	5.00%
t=	20
principal		*	PV of $1 at 5% for 20 yrs =
1,500,000		*	0.37689		=	565335
interest		*	PV of ordinary annuity at 5%=
75000		*	12.46221		=	934665
bond issue price						1500000