i am struggling with these any
help would be appreciated. please also leave step by step solutions
for learning purposes
Homework Answers
Answer to Question 1-A:
Face Value of Bonds = $2,080,000
Issue Value of Bonds = 105% * Face Value of Bonds
Issue Value of Bonds = 105% * $2,080,000
Issue Value of Bonds = $2,184,000
Premium on Bonds Payable = Issue Value of Bonds - Face Value of
Bonds
Premium on Bonds Payable = $2,184,000 - $2,080,000
Premium on Bonds Payable = $104,000
Time to Maturity = 10 years
Semiannual Period = 20
Annual Coupon Rate = 12.00%
Semiannual Coupon Rate = 6.00%
Semiannual Coupon = 6.00% * $2,080,000
Semiannual Coupon = $124,800
Semiannual Amortization of Premium = Premium on Bonds Payable /
Semiannual Period
Semiannual Amortization of Premium = $104,000 / 20
Semiannual Amortization of Premium = $5,200
Semiannual Interest Expense = Semiannual Coupon - Semiannual
Amortization of Premium
Semiannual Interest Expense = $124,800 - $5,200
Semiannual Interest Expense = $119,600
Interest Expense recorded on July 1, 2020 and December 31, 2020 is $119,600
Answer to Question 1-B:
Issue Value of Bonds = $488,488
Annual Interest Rate = 12.00%
Semiannual Interest Rate = 6.00%
Interest Expense on October 31, 2020 = $488,488 * 6.00% *
(4/6)
Interest Expense on October 31, 2020 = $19,540
Add Answer to:
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