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Present Value of Bonds Payable; Premium Moss Co. issued $270,000 of four-year, 13% bonds, with interest...

Present Value of Bonds Payable; Premium

Moss Co. issued $270,000 of four-year, 13% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar.

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Answer #1

Present value of the bonds payable = $ 287,103

Calculation:

Present value of interest payments $               111,172
[$270,000*6.5%* 6.33457 PV annuity factor (5.5%, 4 years, semi-annual bond)]
Present value of the face value $               175,932
[$2700,000 x 0.65160 PV ordinary factor (5.5%, 4 years)]
Present Value of Bond $               287,103
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