Reynolds Corporation issues $500,000 of five-year, 8 percent bonds at 102. Interest is paid semiannually. Assume that
Question:
Reynolds Corporation issues $500,000 of five-year, 8 percent bonds at 102. Interest is paid semiannually. Assume that the market rate for similar investments is 7 percent and that the bonds are issued on an interest date. You must show your work and your answers must have dollar signs.
a) How much cash was received upon issuance of the bonds?
b) How much interest is paid each interest period to the bondholders (remember interest is paid semiannually)? Be sure to include a dollar sign in your final answer.
c) How much bond interest expense, including amortization of discount or premium, is to be recorded on the first interest date (after the issue date)? This would be the interest expense to the bondholders plus amortization of a discount (or less amortization of a premium). Be sure to include a dollar sign in your final answer.
d) What is the carrying value of the bonds after the first interest date (after the issue date)? The carrying value is the amount of the bonds that are contractually due less the amount of the unamortized discount (or plus the amount of unamortized premium) after the interest payment date. Be sure to include a dollar sign in your final answer.
Expert Answer:
a How much cash was received upon issuance of the bonds 510000 b How much interest is paid ... View the full answer
