Homework Answers
Ans.
1.
a) Face Value
b) Discount Price
c) Discount Price
2. Price of Bond = Face Value * Issue Price = $ 540,000 * 92 % = $ 496,800
3.
How much will Williams Company pay in interest each year?
Interest = $ 540,000 * 8% = $ 43,200
How much will Williams Company interest expense in first year?
Interest Expense = $ 540,000 * 8% + interest payment; $43,200 discount/5 years = $8,640 yearly amortization
Interest Expense for first year = $ 43,200 +8,640 = $ 51,840
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