Question

1 XYZ issues a two vear 10,000 bond with a 7% stated rate sold to yield a 9% on January 1, 2016. Interest payable on December 31. a. Calculate the issue price of the bond to yield 9% b. Create an amortization schedule for the two years. c. Record the issuing of the bond, both interest payments and the payment of the bond at maturity date in the financial statements effect template on the answer sheet.

Answer 1

1st of all I have assumed that 10,000 bonds are of $100 each.So face value of Bond =$1,000,000
Table values are based on:
n=	2
i=	7.0%
Cash Flow	Amount	Present Value
Interest	$1,000,000*7% =$70,000	$7,000*PVAF(9%,2) =$3,000*1.75911 =$123,138
Principal	$1,000,000	$1,000,000*PVIF(9%,2) =$1,000,000*0.84168 =$841,680
Price of Bonds		$964,818
Discount on bonds =$1,000,000 - $964,818 =$35,182
Amortization table
Date	Interest Payment($1,000,000*7%)	Interest expenses(Bond carrying amount*9%)	Discount amorrtization	Bond carrying amount
01-Jan-16				9,64,818
31-Dec-16	70,000	86,834	16,834	9,81,652
31-Dec-17	70,000	88,349	18,349	10,00,000
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-16	Cash	9,64,818
		Discount on Bonds Payable	35,182
		Bonds Payable		10,00,000
		(To bonds issued at discount)
	31-Dec-16	Interest Expenses	86,834
		Discounts on Bond payable		16,834
		Cash		70,000
		(Discount on Bonds amortized)
	31-Dec-17	Interest Expenses	88,349
		Discounts on Bond payable		18,349
		Cash		70,000
		(Discount on Bonds amortized)