Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 2016. The market interest...

Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 2016. The market interest rate at the date of issuance was 10%, and the Apollo Corporation bonds pay interest semiannually. Apollo Corporation's year-end is March 31. Calculate the issue price of the bonds using the PV function in Microsoft® Excel®. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar. Record Apollo Corporation's issuance of the bonds on March 31, 2016, and payment of the first semiannual interest amount and amortization of the bond discount on September 30, 2016. Note. Explanations are not required. Show all calculations for your solution. * I need help on calculations* Can you direct me on how to calculate the issue price on an excel worksheet ?

Semiannual Interest : 560000 *.07 *6/12 = 19600

semiannual months : 12* 2 = 24

semiannual yield : 10*6/12 = 5%

Issue Price : [PVA 5%,24*interest ]+[PVF 5%,24*face value]

=[13.79864*19600] +[.31007*560000]

=270453.34+ 173639.2

= $ 444093 rounded **how do I enter on excel worksheet?

Solutions

Expert Solution

Issue Price f Bonds:
Present value of Interest for 24 periods at 5 % Annuity factor i.e. 13.7986					270453
Present value of fce value received at the end of 24 periods at PVF i.e.0.31007					173640
Issue Price f Bonds:					444093

Note: Semi Annual Interest: 560,0007%6/12 = 19600


Amortization table:
Date	Book value	Interest Exp	Cash Interest		Discount	Discount	Book value of Bonds
	Bonds In beg	at 5%	at 3.5%		Amortized	Unamortized	at the end
Mar 31 2016	444093					115907	444093
Sep 30 2016	444093	22205	19600		2605	113302	446698
Mar 31 2017	446698	22335	19,600		2,735	110,567	449,433
Sep 30 2017	449433	22472	19,600		2,872	107,695	452,305

Journal Entries:
For issuance:
Mar 31,2016	Cash Account Dr.		444093
	Discount on Bonds payable Dr.		115907
	Bonds payable			560,000
	(for issuance of bonds)

For Interest payment:
Sep 30,2016	Interest expense Dr.		22205
	Cash Account			19600
	Discount on bonds payable			2605

ekkarill92 answered 10 months ago

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