Question

On June 30, 2018, Singleton Computers issued 8% stated rate bonds with a face amount of...

On June 30, 2018, Singleton Computers issued 8% stated rate bonds with a face amount of \$100 million. The bonds mature on June 30, 2033 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (4.0%) on June 30 and December 31, beginning on December 31, 2018. (FV of \$1, PV of \$1, FVA of \$1, PVA of \$1, FVAD of \$1 and PVAD of \$1) (Use appropriate factor(s) from the tables provided.)

Required:
1.
Determine the price of the bonds on June 30, 2018.
2. Calculate the interest expense Singleton reports in 2018 for these bonds using the effective interest method.

 Bond characterstics Amount 1-a) Principal 100,000,000 interest 4,000,000 Market interest rate 3% periods to maturity 30 issue price 119,600,760 Calculation of bond issue price Where i= 3.00% t= 30 principal * PV of \$1 at 3% for 30 yrs = 100,000,000 * 0.41199 = 41199000 interest * PV of ordinary annuity at 3%= 4000000 * 19.60044 = 78401760 bond issue price 119600760 1-b) interest expense = 119600760*3%= 3588023

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