Refer to E14-18 and Auburn Limited. E14-18 On June 30, 2007, Auburn Limited issued 12% bonds with

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Refer to E14-18 and Auburn Limited.
E14-18
On June 30, 2007, Auburn Limited issued 12% bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2014.
Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2014, and to issue new bonds. New 10% bonds were sold in the amount of $1 million at 102; they mature in 20 years. The company follows ASPE and uses straight-line amortization. The interest payment dates are December 31 and June 30 of each year.
Instructions
Repeat the instructions of E14-18 assuming that Auburn Limited follows IFRS and uses the effective interest method. Provide an effective-interest table for the bonds from the inception of the bond to the date of the redemption.
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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