Zero+Coupon+Bond+Example

Zero+Coupon+Bond+Example - 53,680 Bonds payable 100,000...

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Zero Coupon Bond Example ABC issued $100,000 of par value zero coupon bonds that mature in 10 years. At the time the bonds were issued the market rate of interest is 8%. Market price = $100,000 x pv of single amount n=10, i=8% =$100,000 x .4632 =$46,320 Year 1: 1/1 Cash 46,320 Discount on bonds payable
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Unformatted text preview: 53,680 Bonds payable 100,000 12/31 Interest expense 3,706 Discount on bonds payable 3,706 (100,000 53,680) x 8% Year 2: 12/31 Interest expense 4,002 Discount on bonds payable 4,002 (100,000 49,974) x 8% Note: (53,680 3,706) = 49,974...
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