Analyzing and Reporting Financial Statement Effects of Bond Transactions Assume that on January 1, Comcast issues...

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Analyzing and Reporting Financial Statement Effects of Bond Transactions Assume that on January 1, Comcast issues...

Analyzing and Reporting Financial Statement Effects of Bond Transactions

Assume that on January 1, Comcast issues $500,000 of 5-year, 10% coupon bonds payable, yielding an effective annual interest rate of 8%. Interest is payable semiannually on June 30 and December 31.

B) Complete Comcast’s financial statement effects template for

b. semiannual interest payment and premium amortization on Jun. 30 of the 1st year.

C. semiannual interest payment and premium amortization on Dec. 31 of the 1st year.

C) Prepare an amortization table for the bonds for five years.

business finance

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Answer 1

Answer #1

price of bond = Using present value function in MS excel	pv(rate,nper,pmt,fv,type) rate = 4% nper = 10 pmt = 50 fv =1000 type =0	PV(4%,10,50,1000,0)	($1,081.1090)
total value of bond issue	(500000*1081.109)/1000	540554.5

Income statement
For the period ending June 30 of Year 1
Interest expense	21622.2

Balance sheet - As on dec 31 Year 1
Liabilities
Bonds payable	540555-3377.8	537177.2

Income statement
For the period ending Dec. 31 of Year 1
Interest expense	21487.088

Balance sheet - As on dec 31 Year 1
Liabilities
Bonds payable	537177.2-3512.912	533664.288
Amortization Schedule
semi annual period	cash paid =face value*semi annual coupon rate	Interest expense = carrying value*semiannual effective annual interest	premium amortized = cash paid-interest expense	carrying value of premium on bonds payable = balance in carrying value of bond premium-premium amortized	Bonds payable	carrying value of bonds payable = carrying value of bonds payable-premium amortized
0				40555	500000	540555
1	25000	21622.2	3377.8	37177.2	500000	537177.2
2	25000	21487.088	3512.912	33664.288	500000	533664.288
3	25000	21346.57152	3653.42848	30010.86	500000	530010.86
4	25000	21200.43438	3799.565619	26211.294	500000	526211.294
5	25000	21048.45176	3951.548244	22259.746	500000	522259.746
6	25000	20890.38983	4109.610174	18150.135	500000	518150.135
7	25000	20726.00542	4273.994581	13876.141	500000	513876.141
8	25000	20555.04564	4444.954364	9431.1865	500000	509431.187
9	25000	20377.24746	4622.752538	4808.434	500000	504808.434
10	25000	20192.33736	4807.66264	0.7713601	500000	500000.771

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