Bush Company authorized $150,000 of 5-year bonds dated January 1, 20X1. The stated rate of interest was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 20X1, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for five periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar.
(a) What would be the amount of premium amortization for June 30, 20X1?
(b) What would be the amount of premium amortization for December 31, 20X1?
(c) What would be the amount of the interest payment on June 30, 20X1?
(d) What would be the amount of the interest payment on December 31, 20X1?
Bush Company authorized $150,000 of 5-year bonds dated January 1, 20X1. The stated rate of interest was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 20X1, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for five periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar.
(a) What would be the amount of premium amortization for June 30, 20X1?
(b) What would be the amount of premium amortization for December 31, 20X1?
(c) What would be the amount of the interest payment on June 30, 20X1?
(d) What would be the amount of the interest payment on December 31, 20X1?
Related questions
| On January 1, 2015, Piper Co. issued ten-year bonds with a facevalue of $3,000,000 and a stated interest rate of 10%, payablesemiannually on June 30 and December 31. The bonds were sold toyield 12%. Table values are:
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| Calculate the issue price of the bonds.
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Without prejudice to your solution in part (a), assume that theissue price was $2,652,000. Prepare the amortization table for2015, assuming that amortization is recorded on interest paymentdates using the effective-interest method. |
Date Cash Expense Amortization Carrying Amount
1/1/15
6/30/15
12/31/15
| New Hampshire Company is considering two investments. Therelevant data follows: ProjectA Project B Cost $200,000 $300,000 Annual cash savings(end ofyear) $50,692 $60,995 Terminal salvagevalue $50,000 $70,000 Estimated useful life inyears 5 5 Minimum desired rate ofreturn 10% 10% Method ofdepreciation Straight-line Straight-line PresentValue Present Value Of$1 of Ordinary for 5periods Annuity of $1 for 5 periods 5% 0.7835 4.3295 6% 0.7473 4.2124 7% 0.713 4.1002 8% 0.6806 3.9927 10% 0.6209 3.7908 12% 0.5674 3.6048 14% 0.5194 3.4331 Ignore taxes. Using the net present value method, which projectshould be accepted? SHOW WORK | ||
