Question

Question 2 On January 1, 2018, Carvel Corp. issued five-year bonds with a face value of $480,000 and a coupon interest rate of 6%, with interest payable semi-annually. (a) Your answer is correct. Prepare a partial bond amortization table for the first two interest payments assuming that interest is paid on July 1 and January 1 and that the bonds sold when the market interest rate was 5%. (Round answers to 0 decimal places, e.g. 5,255.) CARVEL CORP. Bond Premium Amortization On January 1, 2018 Interest Expense Premium Amortization Unamortized Premium Semi-annual Interest Periods Interest Payment Bond Carrying Amount 21005 Ga 501005 Jan. 1/18 14400 12525 1875 T 19130 July 1/18 499130 7 14400 | 14400 Jan. 1/19 t 1922 12478 17208 497208

Answer 1

Solution c:

Computation of bond price
Table values are based on:
n=	10
i=	3.50%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.70892	$480,000.00	$340,282
Interest (Annuity)	8.31661	$14,400.00	$119,759
Price of bonds			$460,041

Bond Amortization Table
Semiannual interest period end	Cash interest paid	Bond Interest Expense	Discount Amortization	Unamortized Discount	Carrying Value
1-Jan-18				$19,959	$460,041
1-Jul-18	$14,400	$16,101	$1,701	$18,258	$461,742
1-Jan-19	$14,400	$16,161	$1,761	$16,497	$463,503