Question

On June 30, 2021, Singleton Computers issued 6% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2036 (15 years). The market rate of interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (3%) on June 30 and December 31, beginning on December 31, 2021. (EV of $1, PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 

Required:

 1. Determine the price of the bonds on June 30, 2021 

 2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method.

Answer 1

Answer is attached below

n = 1 = Answer 1 Table values are based on 30 2.50% Cash flow Amount Present Value Interest 6,000,000 125,581,800 (6,000,000 * PVA (2.5%, 30 years) (6,000,000 * 20.9303) Principal 200,000,000 95,348,000 (200,000,000 * PV of (2%, 30 years) )200,000,000 * 0.47674) Price of Bonds 220,929,800 Answer 2 Period End 6/30/2021 12/31/2021 Cash Interest Paid Bond Interest Expense Premium Amortization Carrying Value 220,929,800 6,000,000 5,523,245 476,755 220,453,045 (220,929,800 - 476,755) (220,929,800*0.025)

1--- ser 3 "n=HT四 18 0.9901 1974 3 29410 4 3.5020 4.8534 5.7955 E.7287 8 7.6517 9 8.566。 10 9.4713 11 10.3676 12 11.2551 13 12.1337 14 13.2.37 15 13.8651 16 14.7179 17 15.5623 18 16.3983 12 17.2260 20 18.0456 21 18.8570 22 19.6604 23 20.4558 24 21.2434 25 22.0232 26 22.7952 27 23.5596 28 24,3164 29 25.0658 28 0.9804 1.9416 2.3833 3.8077 4.7135 5. 6014 6.4720 7.3255 8.1622 8.9826 2.7868 10.5753 11.3484 12.1262 12.8493 13.5777 14.2919 14.9920 15.6785 16.3514 17.0112 17.6580 18.2522 18.9139 19.5235 20.1210 20.7C69 21.2813 21.2444 2.5% 0.9756 1.9274 2.8560 3.762 4.6458 5.5081 6.3494 7.1701 7.370S 8.7521 5.5142 10.2578 10.9832 11.6979 12.3814 13.0550 13.7122 14.3534 14.9789 15.5852 16.1845 16.7654 17.3321 17.8852 18.4244 18.9506 12.4640 19.9649 20.4535 38 0.2709 1.3135 2.8286 3.7171 4.5797 5.4172 6.2313 7.0197 7.7861 8.5302 9.2526 9.9540 10.6350 11.2961 11.9379 12.5611 13.1661 13.7535 14.3238 14.8775 15.4150 15.9369 16.4436 16.9355 17.4131 17.8768 18.327) 18.7641 19.1885 4 0.5515 1.8861 2.7751 3.6299 4.4518 5.2421 5. CO21 6.7327 7.4353 8.1109 37605 9.3851 2.2856 10.5631 11.1184 11.6523 12.1657 12. ES33 13.1339 13.5903 14.2292 14.4511 14.8568 15.2470 15.6221 15.5828 16.3296 16.6631 16.9837 58 0.5524 1.8594 2.7232 3.546 4.3295 5.0757 5.7864 6.4632 7.1078 7.7217 8.3064 8.8633 9.3936 2.8986 10.3757 10.8378 11.2741 11.6896 12.0853 12.4622 12.8212 13.1630 13.4886 13.7986 14.0939 14.3752 14.6430 14.8981 15.1411 6. 0.9434 1.8334 2.6730 3.4E51 4.2124 4.9173 5.5824 E.2098 6.8017 7.3601 7.3269 8.3838 8.8527 9.2950 2.7122 10.1259 10.4773 10.8276 11.1581 11.4699 11.7641 12.2416 12.3134 12.5504 12.7834 13.0032 13.2175 13.4062 13.5907 了 0.534E 1.8082 2.6243 3.3872 4.1002 4.7665 5.3893 5.9713 6.5152 7.0236 7.4987 7.3427 8.3577 8.7455 2.1073 9.4466 9.7632 10.2551 10.3356 10.5342 10.8355 11.CE12 11.2722 11.4693 11.6536 11.8258 11.9867 12.1371 12.2777 30 25.8077 31 26.5423 22.3965 22.937 20.9303 21.3954 19. EC24 20.CCC4 17.2920 17.5885 15.3725 15.5928 13.7648 13.9291 12.479) 12.5318

1 5 6 7 8 9 10 11 12 13 14 PV = 1/(1+rate) nper 196 0.9901 0.9803 0.9706 0.9610 0.9515 0.9420 0.9327 0.9235 0.9143 0.9053 0.8963 0.8874 0.8787 0.8700 0.8613 0.8528 0.8444 0.8360 0.8277 0.8195 0.8114 0.8034 0.7954 0.7876 0.7798 0.7720 0.7644 0.7568 0.7493 296 0.9804 0.9612 0.9423 0.9238 0.9057 0.8880 0.8706 0.8535 0.8368 0.8203 0.8043 0.7885 0.7730 0.7579 0.7430 0.7284 0.7142 0.7002 0.6864 0.6730 0.6598 0.6468 0.6342 0.6217 0.6095 0.5976 0.5859 0.5744 0.5631 2.5096 0.9756 0.9518 0.9286 0.9060 0.8839 0.8623 0.8413 0.8207 0.8007 0.7812 0.7621 0.7436 0.7254 0.7077 0.6905 0.6736 0.6572 0.6412 0.6255 0.6103 0.5954 0.5809 0.5667 0.5529 0.5394 0.5262 0.5134 0.5009 0.4887 396 0.9709 0.9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 0.6611 0.6419 0.6232 0.6050 0.5874 0.5703 0.5537 0.5375 0.5219 0.5067 0.4919 0.4776 0.4637 0.4502 0.4371 0.4243 496 0.9615 0.9246 0.8890 0.8548 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.4388 0.4220 0.4057 0.3901 0.3751 0.3607 0.3468 0.3335 0.3207 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 0.7419 0.7346 0.5521 0.5412 0.47674 0.4651 0.4120 0.4000 0.3083 0.2965

PVA Table

PV = rate, nper, PMT)