Question

On June 30, 2021, Singleton Computers issued 5% stated rate bonds with a face amount of $280 million. The bonds mature on June 30, 2036 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually 12.5%) on June 30 and December 31, beginning on December 31, 2021. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds on June 30, 2021. 2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price of the bonds on June 30, 2021. (Enter your answers in whole dollars. Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount.) 30 2.0% Table values are based on: n= i= Cash Flow Amount Interest Principal Price of bonds Present Value < Required 1 Required 2 >

Answer 1

Solution 1:

Chart Values are based on:
n= (15 Years*2)	30	Half years
i= (4%/2)	2.0%	Semi annual
Cash Flow	Table Value	*	Amount	=	Present Value
Par (Maturity) Value	0.55207089	*	$28,00,00,000	=	$15,45,79,849
Interest (Annuity) [$280,000,000*5%*6/12]	22.3964556	*	$70,00,000	=	$15,67,75,189
Price of Bonds					$31,13,55,038

Solution 2:

Date	Cash payment	Interest Expense	Premium amortization	Carrying value of bond
30-Jun-21				$31,13,55,038
31-Dec-21	$70,00,000	$62,27,101	$7,72,899	$31,05,82,139