Cassius Corporation issued $2,000,000, 10 year, 6% bonds on January 1, 2019. The bonds pay interest annually on January 1.
1. What is the annual interest payment?
2. How many interest payment periods are there?
3 If the bonds sold at 98% of face value?
4. Did they sell at a discount or premium?
5. What is the discount or premium amount?
6. How much of the discount or premium would be amortized on each interest payment period?
7 If the bonds are sold at 103% of face value
8. Did they sell at a discount or premium?
9. What is the discount or premium amount?
10 How much of the discount or premium would be amortized on each interest payment period?
| 1) | Annual interest payment | = | $ 1,20,000.00 | ($ 2000000 x 6%) | ||
| 2) | No. of periods | = | 10 | |||
| 3) | 98% of Face Value | = | $ 19,60,000.00 | ($ 2000000 x 98%) | ||
| 4) | At discount | |||||
| 5) | Amount of discount | = | $ 40,000.00 | ($ 2000000 - $ 1960000) | ||
| 6) | Amount of amortization | |||||
| on each interest payment period | = | $ 4,000.00 | ($ 40000 / 10) | |||
| 7) | 103% of Face Value | = | $ 20,60,000.00 | ($ 2000000 x 103%) | ||
| 8) | At premium | |||||
| 9) | Amount of premium | = | $ 60,000.00 | ($ 2060000 - $ 2000000) | ||
| 10) | Amount of amortization | = | $ 6,000.00 | ($ 60000 / 10) | ||
| on each interest payment period | ||||||
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