Marin Company sells 10% bonds having a maturity value of $2,200,000 for $2,118,688. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.
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Effective Interest Rate Calculation: | ||||
Issue Price of Bond | $ -2,118,688 | |||
Interest on Bond for Year 2017 | 2200000*10% | $ 220,000 | ||
Interest on Bond for Year 2018 | 2200000*10% | $ 220,000 | ||
Interest on Bond for Year 2019 | 2200000*10% | $ 220,000 | ||
Interest on Bond for Year 2020 | 2200000*10% | $ 220,000 | ||
Interest on Bond for Year 2021+Maturity Amount | 2200000+(2200000*10%) | $ 2,420,000 | ||
Formula Used | IRR(C6:C11) | |||
Effective Interest Rate | 11.00% | |||
Schedule: | ||||
Year | Cash Paid | Interest Expense | Discount Amortized | Carrying Amount |
10% of 2200000 | 11% of Carrying Amount of previous Year | Interest-Cash Paid | Carrying amt of previous year-Discount | |
Jan 1 2017 | $ 81,312 | $ 2,118,688 | ||
Jan 1 2018 | $ 220,000 | $ 233,056 | $ 13,056 | $ 2,131,744 |
Jan 1 2019 | $ 220,000 | $ 234,492 | $ 14,492 | $ 2,146,235 |
Jan 1 2020 | $ 220,000 | $ 236,086 | $ 16,086 | $ 2,162,321 |
Jan 1 2021 | $ 220,000 | $ 237,855 | $ 17,855 | $ 2,180,177 |
Jan 1 2022 | $ 220,000 | $ 239,819 | $ 19,823 | $ 2,200,000 |
Marin Company sells 10% bonds having a maturity value of $2,200,000 for $2,118,688. The bonds are...
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