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Ch.+10+Problem+Solutions

# Ch.+10+Problem+Solutions - Problem 10-1B(50 minutes Part 1...

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Problem 10-1B (50 minutes) Part 1 a. Cash Flow Table Table Value* Amount Present Value Par value ................. B.1 0.9235 \$35,000 \$32,323 Interest (annuity) .... B.3 7.6517 700** 5,356 Price of bonds ........ \$37,679 Bond Premium ........ \$ 2,679 **\$35,000 x 0.04 x ½ = \$700 * Table values are based on a discount rate of 1% (half the annual market rate) and 8 periods (semiannual payments). b. 2009 Jan. 1 Cash .............................................................. 37,679 Premium on Bonds Payable ................. 2,679 Bonds Payable ....................................... 35,000 Sold bonds on stated issue date. Part 2 a. Cash Flow Table Table Value* Amount Present Value Par value ................. B.1 0.8535 \$35,000 \$29,873 Interest (annuity) .... B.3 7.3255 700 5,128 Price of bonds ........ \$35,001** * Table values are based on a discount rate of 2% (half the annual market rate) and 8 periods (semiannual payments). (Note: When the contract rate and market rate are the same, the bonds sell at par and there is no discount or premium.) **Difference due to rounding b. 2009 Jan. 1 Cash .............................................................. 35,000 Bonds Payable ....................................... 35,000 Sold bonds on stated issue date.

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Problem 10-1B (Concluded) Part 3 a. Cash Flow Table Table Value* Amount Present Value Par value ................. B.1 0.7894 \$35,000 \$27,629 Interest (annuity) .... B.3 7.0197 700 4,914 Price of bonds ........ \$32,543 Bond discount ........ \$ 2,457 * Table values are based on a discount rate of 3% (half the annual market rate) and 8 periods (semiannual payments). b. 2009 Jan. 1 Cash .............................................................. 32,543 Discount on Bonds Payable ....................... 2,457 Bonds Payable .......................................

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Ch.+10+Problem+Solutions - Problem 10-1B(50 minutes Part 1...

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