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Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle par


Present Value of $1 at Compound Interest EXHIBIT 8 Periods 4% 0.96154 0.92456 0.88900 0.85480 0.82193 0.79031 0.75992 0.73069
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Answer #1
a] PV of the face value of the bonds = 30000000*0.58543 = $       1,75,62,900
PV of semi-annual interest = 1950000*7.53763 = $       1,46,98,379
Cash proceeds from the bond = $       3,22,61,279
b] Premium to be amortized = 32261279-30000000 = $    22,61,279
AMORTIZATION TABLE:
HALF YEAR BEG BAL INTEREST EXPENSE INTEREST PAID AMORTIZATION OF PREMIUM END BAL
1 $       3,22,61,279 $    17,74,370 $      19,50,000 $             1,75,630 $    3,20,85,649
2 $       3,20,85,649 $    17,64,711 $      19,50,000 $             1,85,289 $    3,19,00,360
3 $       3,19,00,360 $    17,54,520 $      19,50,000 $             1,95,480 $    3,17,04,880
4 $       3,17,04,880 $    17,43,768 $      19,50,000 $             2,06,232 $    3,14,98,648
5 $       3,14,98,648 $    17,32,426 $      19,50,000 $             2,17,574 $    3,12,81,074
6 $       3,12,81,074 $    17,20,459 $      19,50,000 $             2,29,541 $    3,10,51,533
7 $       3,10,51,533 $    17,07,834 $      19,50,000 $             2,42,166 $    3,08,09,367
8 $       3,08,09,367 $    16,94,515 $      19,50,000 $             2,55,485 $    3,05,53,882
9 $       3,05,53,882 $    16,80,464 $      19,50,000 $             2,69,536 $    3,02,84,346
10 $       3,02,84,346 $    16,65,639 $      19,50,000 $             2,84,361 $    2,99,99,985
c] Amount of premium amortized for the second semi-annual interest payment = $             1,85,289
d] Interest expense for the first year = $           35,39,081
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