A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon...

A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon rate of 5%, pay interest semi-annually on Jan 1st and July 1st of each year, and mature in 10 years. The bonds are issued at an effective market rate of 4%, which corresponds to a price of 108.176 ($324,527). The company incurred bond issue costs totaling $35,000. Given this information calculate the following for January 1, 2020:

Bonds Payable-Face Value:

Premium on Bonds Payable:

Unamortized Bond Issue Costs:

Expert Solution

On Jan 1, 2020 [after payment of Interest]:

Bonds Payable Face Value = $ 300,000
Premium on Bonds Payable = $ 10,988.03
Unamortised Bonds Cost = $ 14,000

Working for above answers

	Bonds Face Value	Cash Interest	Interest Expense	Issue Cost amortisation = 35000 / 20 payments	Premium on Bonds Payable = Interest expense – Cash Interest	Bonds Carrying Value
Issue date	$ 300,000.00			$ 35,000.00	$ 24,527.00	$ 324,527.00
01-Jul-14	$ 300,000.00	$ 7,500.00	$ 6,490.54	$ (1,750.00)	$ (1,009.46)	$ 323,517.54
01-Jan-15	$ 300,000.00	$ 7,500.00	$ 6,470.35	$ (1,750.00)	$ (1,029.65)	$ 322,487.89
01-Jul-15	$ 300,000.00	$ 7,500.00	$ 6,449.76	$ (1,750.00)	$ (1,050.24)	$ 321,437.65
01-Jan-16	$ 300,000.00	$ 7,500.00	$ 6,428.75	$ (1,750.00)	$ (1,071.25)	$ 320,366.40
01-Jul-16	$ 300,000.00	$ 7,500.00	$ 6,407.33	$ (1,750.00)	$ (1,092.67)	$ 319,273.73
01-Jan-17	$ 300,000.00	$ 7,500.00	$ 6,385.47	$ (1,750.00)	$ (1,114.53)	$ 318,159.20
01-Jul-17	$ 300,000.00	$ 7,500.00	$ 6,363.18	$ (1,750.00)	$ (1,136.82)	$ 317,022.39
01-Jan-18	$ 300,000.00	$ 7,500.00	$ 6,340.45	$ (1,750.00)	$ (1,159.55)	$ 315,862.84
01-Jul-18	$ 300,000.00	$ 7,500.00	$ 6,317.26	$ (1,750.00)	$ (1,182.74)	$ 314,680.09
01-Jan-19	$ 300,000.00	$ 7,500.00	$ 6,293.60	$ (1,750.00)	$ (1,206.40)	$ 313,473.69
01-Jul-19	$ 300,000.00	$ 7,500.00	$ 6,269.47	$ (1,750.00)	$ (1,230.53)	$ 312,243.17
01-Jan-20	$ 300,000.00	$ 7,500.00	$ 6,244.86	$ (1,750.00)	$ (1,255.14)	$ 310,988.03
				$ 14,000.00 = Answer	$ 10,988.03 = Answer

ekkarill92 answered 1 year ago

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