Question

In: Accounting

On January 1, 2020, Kingbird Inc. issued $350,000 of 6-year, 3% bonds to yield a market...

On January 1, 2020, Kingbird Inc. issued $350,000 of 6-year, 3% bonds to yield a market interest rate of 4%. Interest is paid every quarter on January 1, April 1, July 1, and October 1. Kingbird has a calendar year end.

After recording the December 31, 2021 accrual for quarterly interest, and making the payment on January 1, 2022, all the bonds were redeemed at 101.

(a)

Use Excel or a financial calculator to determine how much the company received from the sale of these bonds.
The company received

Solutions

Expert Solution

Answer:
Interest Payment per quarter
             = ($ 350,000 x 3% )/ 4 quarters
              =     $ 2,625
Market Rate of Interest per quarter = 4% / 4   = 1%
Issue price of the bond
               = Issue Price x PVF x ( 1% , 24 periods ) + Interest x PVAF x ( 1% , 24 periods )
               = ( $ 350,000 x 0.78757 ) + ( $ 2,625 x 21.24339 )
               =   $ 275,649.50 + $ 55,763.90
               = $ 331,413
The company received   = $ 331,413

ekkarill92 answered 1 year ago
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