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February 4, 2019 1. On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $5,000,000 and a stated interest
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Answer #1

Answer a.

Face Value of Bonds = $5,000,000

Annual Coupon Rate = 10.00%
Semiannual Coupon Rate = 5.00%
Semiannual Coupon = 5.00% * $5,000,000
Semiannual Coupon = $250,000

Time to Maturity = 10 years
Semiannual Period = 20

Annual Interest Rate = 12.00%
Semiannual Interest Rate = 6.00%

Issue Price of Bonds = $250,000 * PVIFA(6.00%, 20) + $5,000,000 * PVIF(6.00%, 20)
Issue Price of Bonds = $250,000 * (1 - (1/1.06)^20) / 0.06 + $5,000,000 / 1.06^20
Issue Price of Bonds = $4,426,504

Credit Date General Journal Jan. 01, 2018 Cash Discount on Bonds Payable Bonds Payable (To record issue of bonds) $ $ Debit 4

Answer b.

Date Date | Cash Paid Jan. 01, 2018 June 30, 2018 $ Dec. 31, 2018 $ Interest Discount Unamortized Carrying Value Expense Amor

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