Question

# Christmas Anytime issues \$740,000 of 6% bonds, due in 15 years, with interest payable semiannually on...

Christmas Anytime issues \$740,000 of 6% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:

1. The market interest rate is 5% and the bonds issue at a premium

 Date Cash Paid Interest Expense Change in Carrying Value Carrying Value 01/01/2021 06/30/2021 12/31/2021

.

When the market interest rate is lower than the coupon rate, bonds will be issued at a discount.

Issue price

= [\$740,000 x 3% x PVIFA (2.5%, 30)] + [\$740,000 x PVIF (2.5%, 30)]

= (\$22,200 x 20.93) + (\$740,000 x 0.477)

= \$817,626

The required amortization table will be prepared as follows:

 Date Cash Paid Interest Expense Change in carrying value Carrying value 1/1/2021 817626 6/30/2021 22200 20440.7 1759.4 815866.7 12/31/2021 22200 20396.7 1803.3 814063.3

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