Question

Required information The following information applies to the questions displayed below) Part of 2 On January 1, 2021, White Water issues $580,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7% and the bonds issued at $633,337 Required: 1. Using an amortization schedule, show that the bonds have a carrying value of $626,569 on December 31, 2023. (Round your interest expense to the nearest whole dollar.) Cash Pald Interest Expense Decrease in Carrying Value Carrying Value Date 01/01/2021 06/30/2021 12/31/2021 05/30/2022 231/2022 06/30/2023 12312023

Answer 1

Face Value of Bonds = $580,000 Issue Value of Bonds = $633,337 Annual Coupon Rate = 8.00% Semiannual Coupon Rate = 4.00% Semiannual Coupon = 4.00% * $580,000 Semiannual Coupon = $23,200 Time to Maturity = 15 years Semiannual Period = 30 Annual Interest Rate = 7.00% Semiannual Interest Rate = 3.50% Date 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 $ $ $ $ Cash Paid Decrease in Interest Expense Carrying Value Carrying Value $ 633,337 23,200 $ 22,167 $ 1,033 $ 632,304 23,200 $ 22,131$ 1,069 $ 631,235 23,200 $ 22,093 $ 1,107 $ 630,128 23,200 $ 22,054 $ 1,146 $ 628,982 23,200 $ 22,014 $ 1,186 $ 627,796 23,200 $ 21,973 $ 1,227 $ 626,569 $