Question

1. On January 1, Year 1, Fox Co., Inc., issues $100,000 par value, 5% bonds maturing in 10 years to yield 4% per year, compounded annually. Compute (a) the initial proceeds from the issuance and (b) the carrying value of the bond payable at the end of Year 2.

Answer 1

Initial proceed from issuance of Bond = 5000 * 8.1109 + 100000 * 0.6756 = 108114.50
Closing Value at the end of year 2
Year	Amount Paid	Interest @4%	Reduction	Closing Value
				108114.5
1	5000	4,324.58	675.42	1,07,439.08
2	5000	4,297.56	702.44	1,06,736.64