Question

please help. show work please

at the date of issuance and the bonds pay interest semn ally Kendrick Corporation's year and is March 31. Review Kendrick Corporation issued $500,000 of 6%, 12 year bonds payable on March 31, 2018. The market interest the following mo tion table for Kendrick's bonds Cick on to view the amountable) Read the TV 1. How much cash did Kendrick Corporation borrow on March 31, 2017 How much cash with company pay back malty on March 31, 2017 Kendrick borrowed cash in the amount of $ on March 31, 2018 Kendrick will pay back cash in the amount of at maturity on March 31, 2031 2. How much as interest will the company pay each months? Kendrick will pay $ cash interest each six months 3. How much interest expense wil Kendrick Corporation report on September 30, 2018 and on Kendrick will reports of interestepense on September 30, 2018 reports of mense on March 31, 2020 Why does the amount of interest expense increase och period? the bonds move toward maturity

Answer 1

Par Value = $500,000
Coupon payment = $500,000 * 6% * 6/12 = $15,000
No. of payments = 12 years *2 = 24

1). Issue price of bond = Present Value of coupon payments + Present value of maturity
= ($15,000 * PVAF 4.5% 24 ) + ($500,000 * PVF 4.5% 24 )
= ($15,000 * 14.49548) + ($500,000 * 0.3477)
= $391,282.2

Kendrick borrowed cash in the amount of $391,282.20 on March 31, 2019
Kendrick will pay back the cash in the amount of $500,000 at maturity on March 31, 2031

2). Kendrick will pay $15,000 cash payment each six months.

3). Kendrick will report $17,608 of interest expense on Sept 30, 2019.
Kendrick will report $17,725 of interest expense on Mar 31, 2020.
(From amortization table).

Interest expense increases because the Carrying value of bond increases as the bonds move forward to maturity.

(Here drop-down options are not given in the question for last part of 3) Hence choose the appropriate one on the basis of above statement.)