Chiron Corp. had the following information on its December 31, 2020, Balance Sheet: These bonds had...

Chiron Corp. had the following information on its December 31, 2020, Balance Sheet: These bonds had a face rate of 5% and a market rate of 6%. Interest is paid annually each December 31.

Bonds Payable	$600,000
Less: Discount	(25,274)
Bonds Payable (net)	$574,726

What is the value of these bonds at maturity?
What are Chiron’s annual cash interest payments on these bonds?
What is the net value of these bonds?
Prepare an amortization table for these bonds beginning December 31, 2020, and ending December 31, 2023.
What is Chiron’s interest expense for the year ended December 31, 2023?
Show how the bonds would be reported on Chiron’s Balance Sheet at December 31, 2023.

Expert Solution

a)Value of Bonds at maturity = Face value of bond = $ 600000

b)Annual cash interest payment = Face value * face rate

= 600000 * 5%

= $30000

c) net value of these bonds as on 31/12/2020 = $ 574,726

d)

Period ended	Interest expense	Interest paid	Discount amortized	carrying value of Bond
31/12/2020				574726
31/12/2021	574726*6%=34483.56	30000	34483.56-30000=4483.56	574726+4483.56= 579209.56
31/12/2022	579209.56*6%= 34752.57	30000	34752.57-30000= 4752.57	579209.56+4752.57= 583962.13
31/12/2023	583962.13*6%= 35037.73	30000	35037.73-30000= 5037.73	583962.13+5037.73= 588999.86 (rounded to 589000)

e)

Interest expense for 12/31/2023 =$ 35037.73

f)

Bond payable	600000
Less: Discount	(11000)
Bonds Payable (net)	589000

jeff jeffy answered 1 year ago

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