Question

Problem 9-7B Calculate the issue price of a bond and prepare amortization schedules (LO9-5, 9-7) [The following information applies to the questions displayed below.] Christmas Anytime issues $740,000 of 6% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: Problem 9-7B Part 2 2. The market interest rate is 7% and the bonds issue at a discount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round your answers to nearest whole dollar.) Issue price Change in Date Cash Paid Interest Expense Carrying Value Carrying Value carrying value 01/01/2021 06/30/2021 | $ 12/31/2021 22,200 22,200

Answer 1

issue price:

[present value of annuity factor *interest payment] + [present value factor * face value]

here,

present value of annuity factor = [1- (1+r)^(-n)]/r

here,

r = 7% per annum =>3.5% for six months =>0.035.

n =15 years *2=>30.

present value of annuity factor = [1-(1.035)^(-30)]/0.035

=>[1-0.35627841]/0.035

=>18.3920457.

interest payment = 740,000*6%*1/2

=>$22,200.

present value factor = 1/(1.035)^30

=>0.35627841

face value = 740,000

issue price = [18.3920457*22200]+[0.35627841*740,000]

=> 408,303.415+263,646.023

=>671,949.438.

=>671,949....(rounded to nearest dollar).

2nd part:

date	cash paid	interest expense	change in carrying value	carrying value
01/01/2021				671,949
06/30/2021	22,200	23,518	1318	673,267
12,/31,2021	22,200	23,564	1364	674,631