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TABLE 1 Future Value of $1 FV = $1 (1 + i) n/i 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 9.0% 10.0% 1TABLE 3 Future Value of an Ordinary Annuity of $1 FVA - (1 + i) - 1 n/i 1 2 3 4 5 1.0% 1.0000 2.0100 3.0301 4.0604 5.1010 1.5TABLE 5 Future Value of an Annuity Due of $1 FVAD = (1 + i) – 1*(1 + i) n/i 1 2 3 4 5 1.0% 1.5% 1.0100 1.0150 2.0301 2.0452TABLE 2 Present Value of $1 PV = $1 V (1 + i) n/i 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 9.0% 10.0%TABLE4 Present Value of an Ordinary Annuity of $1 1- 1 (1 + i) PVA = n/i 1 2 3 4 5 1.0% 0.99010 1.97040 2.94099 3.90197 4.853TABLE 6 Present Value of an Annuity Due of $1 PVAD = (1 - 17+ iP]x (1 +) n/i 1 2 3 4 5 1.0% 1.00000 1.99010 2.97040 3.94099 4[The following information applies to the questions displayed below.] On January 1, 2018, Morton Sales Co. issued zero-couponOn January 1, 2018, Morton Sales Co. issued zero-coupon bonds with a face value of $6.0 million for cash. The bonds mature inThe 10llowing Information applies to the questions displayed below.) On January 1, 2018, Morton Sales Co. issued zero-coupon[The following information applies to the questions displayed below.] On January 1, 2018, Morton Sales Co. issued zero-coupon

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Answer #1

Face Value of Bond = $6,000,000
Issue Price i.e. Present Value of Bond = $3,050,100
PV Factor = $3,050,100 / $6,000,000 = 0.50835
From PV Factor table, at end of 10 periods, for 7% interest rate, PV Factor is 0.50835

Therefore Annual Effective Interest Rate = 7%

Interest expense for 2018 = $3,050,100 x 7% = $213507

Bonds Payable at end of 2018 = $3,050,100 + 213507 = $3,263,607

Total Interest expense of bond over 10 years = $6,000,000 - $3,050,100 = $2,949,900

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