On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $5,000,000 and a
Question:
On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Present value of 1 for 10 periods at 10% | .386 | ||
Present value of 1 for 10 periods at 12% | .322 | ||
Present value of 1 for 20 periods at 5% | .377 | ||
Present value of 1 for 20 periods at 6% | .312 | ||
Present value of annuity for 10 periods at 10% | 6.145 | ||
Present value of annuity for 10 periods at 12% | 5.650 | ||
Present value of annuity for 20 periods at 5% | 12.462 | ||
Present value of annuity for 20 periods at 6% | 11.470 |
Calculate the issue price of the bonds.
Prepare the amortization table for 2018, assuming that amortization is recorded on interest payment dates using the effective-interest method.
Date | Cash | Expense | Amortization | Carrying Amount |
1/1/18 | $ | |||
6/30/18 | $ | $ | ||
12/31/18 |
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen