ORIE 3150 Homework _6 Fall 2009 Answers revised

ORIE 3150 Homework _6 Fall 2009 Answers revised - ORIE 3150...

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ORIE 3150 Homework #6 Do for October 22, 2009 1. On January 1, 2009, Liquidia Corporation issued a $10,000,000 face value bond with 10% face interest rate and a maturity of 15 years. The semi-annual interest payments are made on June 30 and December 31. The bond was issued at such a price as to yield 9.875%. a. What was the issue price of the bond? ( 29 ( 29 n n i 1 FV i i 1 1 A PV + + + - = - ( 29 ( 29 30 30 1 1 0.049375 10,000,000 500,000 0.049375 1 0.049375 $10,096,766.13 PV PV - - + = + + = b. Prepare the journal entry to record the sale of the bond. Jan. 1, 2009 Cash 10,096,766.13 Bond Payable 10,000,000 Unamort. Bond Premium 96,766.13 c. Prepare the journal entries to record the payment of interest and amortization on June 30, 2009 and December 31, 2009. Use the effective interest method. June 30, 2009 Interest Expense 498,527.83 Unamort. Bond Premium 1,472.17 Cash 500,000 Dec. 31, 2009 Interest Expense 498,455.14 Unamort. Bond Premium 1,544.86 Cash 500,000
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2. On January 1, 2009, Rockpit Corporation issued a $10,000,000 face value bond with 9% face interest rate and a maturity of 10 years. The semi-annual interest payments are made on June 30 and December 31. The bond was issued at such a price as to yield 9.25%. a. What was the issue price of the bond? ( 29 ( 29 20 20 1 1 0.04625 10,000,000 450,000 0.04625 1 0.04625 $9,839,147.75 PV PV - - + = + + = b. Prepare the journal entry to record the sale of the bond.
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