Question

In: Accounting

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually...

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:

3. The market interest rate is 4% and the bonds issue at a premium. (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.)

Solutions

Expert Solution

a. Issue price of bond = =-pv(rate,nper,pmt,fv) Where,
= $ 16,22,635.75 rate 2%
nper 20
pmt $             37,500
fv $       15,00,000
b. Amortization Schedule:
Semi annual period ending on Interest expense Coupon paid in cash Premium amortization Unamortized Premium Carrying value of bond
January 1 $ 1,22,635.75 $ 16,22,635.75
June 30 $           32,452.72 $        37,500.00 $ 5,047.28 $ 1,17,588.47 $ 16,17,588.47
December 31 $           32,351.77 $        37,500.00 $ 5,148.23 $ 1,12,440.23 $ 16,12,440.23

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