Question

Present Value of Bonds Payable; Premium Moss Co. issued $820,000 of five-year, 12% bonds, with interest payable semiannually,

Exhibit 5 Present Value of $1 at Compound Interest Periods 4% 4%2% 0.96154 0.956940 0.92456 0.915730 0.88900 0.876300 0.85480Exhibit 7 Present Value of an Annuity of $1 at Compound Interest Periods -NMONO 4% 47% 5% 57% 6% 67% 0.96154 0.95694 0.95238

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Answer #1

Solution:

Chart Values are based on:
n= (5 Years*2) 10 Half years
i= (10%/2) 5% Semi annual
Cash Flow Table Value * Amount = Present Value
Par (Maturity) Value 0.61391 * $8,20,000 = $5,03,406
Interest (Annuity) [$820,000*12%*6/12] 7.72173 * $49,200 = $3,79,909
Present value of bonds $8,83,315
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