Present Value of Bonds Payable; Premium Moss Co. issued $610,000 of five-year, 13% bonds, with interest...

Question

Question

Present Value of Bonds Payable; Premium Moss Co. issued $610,000 of five-year, 13% bonds, with interest payable semiannually,

Answer 1

Answer #1

Answer:

DETERMINE PRESENT VALUE OF BONDS PAYABLE :

interest rate = 13/2 =6.5%

market rate = 12/2 = 6%

Time = 5*2 = 10 years

Interest = 610000*6.5% = 39650

Present value of bonds payable = present value of interest +present value of maturity

= (39650* 7.3601) +(610000*0.55839)

Present value of bonds payable = $632775

Answer 2

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