Question

The following information applies to the questions displayed below.) Christmas Anytime issues $850,000 of 6% bonds, due in 10 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: Required: 1. The market interest rate is 6% and the bonds issue at face amount. (EV of $1. PV of $1. EVA of S1, and PVA of $1 (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round your answers to nearest whole dollar.) Answer is complete but not entirely correct. Issue price $ 85,000,000 Answer is complete but not entirely correct. Interest Date Cash Paid Change in Carrying Value Expense Carrying Value 85,000,000

Answer 1

Face Value of Bonds = $850,000

Annual Coupon Rate = 6.00%
Semiannual Coupon Rate = 3.00%
Semiannual Coupon = 3.00% * $850,000
Semiannual Coupon = $25,500

Time to Maturity = 10 years
Semiannual Period = 20

Annual Interest Rate = 6.00%
Semiannual Interest Rate = 3.00%

Issue Price of Bonds = $25,500 * PVA of $1 (3.00%, 20) + $850,000 * PV of $1 (3.00%, 20)
Issue Price of Bonds = $25,500 * 14.877475 + $850,000 * 0.553676
Issue Price of Bonds = $850,000

Date Cash Paid Interest Expense Change in Carrying Value 01/01/2021 06/30/2021 12/31/2021 Carrying Value $ 850,000 $ 850,000 $ 850,000 $ $ 25,500 $ 25,500 $ 25,500 $ 25,500 $ - -