January 1, 2018: Xenith Corporation issued 15 year, 6% bonds with a face value of $1,625,000....

January 1, 2018: Xenith Corporation issued 15 year, 6% bonds with a face value of $1,625,000. The bonds were sold to yield 7%. Interest is payable semi-annually on January 1 and July 1. Effective rate amortization is to be used.

1. What is the issue price of the bonds? (Show financial calculator inputs)

2. Using Excel, prepare an amortization table for the entire bond term. (Table should be properly labeled and neatly presented. Amounts should have commas and be rounded to the nearest dollar.)

3. Recond the bond issuance on 1/1/18.

4. Assume the company prepares financial statements semi-annually on June 30 and December 31. Prepare the appropriate adjusting entries for June 30, 2018 and December 31, 2018 for interest and for amortization of the discount or premium.

5. What accounts related to this bond would be shown on the 12/31/18 balance sheet? Show in the proper sections.

Liabilities

Current Liabilities:

Long-term Liabilities:

6. On January 1, 2022, Xenith Corporation paid the interest payment due on that date and then called all the bonds at 103. What is the amount of gain or loss on this call? Show computation.

Prepare all necessary journal entries for the call date. January 1, 2022

Solutions

Expert Solution

Answer to Part 1

Face Value = $1,625,000

Annual Coupon Rate = 6%
Semiannual Coupon Rate = 3%
Semiannual Coupon = 3%*$1,625,000
Semiannual Coupon = $48,750

Time to Maturity = 15 years
Semiannual Period to Maturity = 30

Annual Yield = 7%
Semiannual Yield = 3.5%

Proceed from Issue = $48,750 * PVIFA(3.5%, 30) + $1,625,000 * PVIF(3.5%, 30)

Using financial Calculator:
N = 30
PMT = 48750
FV = 1625000
I = 3.5%

PV = -1475597.50

Proceed from Issue = $1,475,597.50 or $1,475,598

Answer to Part 2.

ekkarill92 answered 1 year ago

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