Question

Serial Bonds (SHOW ALL CALCULATIONS AND WORK) Mitchell Company issued 6,000,000 worth of serial bonds on...

Serial Bonds (SHOW ALL CALCULATIONS AND WORK)

Mitchell Company issued 6,000,000 worth of serial bonds on March 1, 2017. These 7% bonds were sold in a 7.1% market and pay interest each Feb 28th. The serial bonds have the following maturity schedule.

Maturity date Amount maturing
February 28, 2019 0
February 28 2020 1,000,000
February 28, 2022 1,000,000
February 28, 2024 1,500,000
February 28, 2025 2,500,000
Total 6,000,000
Below prepare the cash flows relating to this bond
Maturity date Amount maturing Interest to be paid Total Cash Paid Out
February 28, 2018
February 28, 2019
February 28 2020
February 28 2021
February 28, 2022
February 28, 2023
February 28, 2024
February 28, 2025
Assuming the bonds sold for $5,970,364.83 complete the following amortization table.
Date Principal Cash Interest Interest Expense Amortization Carrying Value
3/1/2017

Homework Answers

Answer #1
Cash flows relating to this bond
Maturity date Amount maturing Interest to be paid Total Cash Paid Out
28-Feb-18 0 0 0
28-Feb-19 0 0 0
February 28 2020 1,000,000 70000 1070000
February 28 2021 0 0
28-Feb-22 1,000,000 70000 1070000
28-Feb-23 0 0 0
28-Feb-24 1,500,000 105000 1605000
28-Feb-25 2,500,000 175000 2675000
Total 6,000,000 420,000 6,420,000
Amortization Table
Date Principal Cash Interest Interest Expense 7.1% Amortization Carrying Value
3/1/2017 6,000,000 0 426000 29,635 5,970,365
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