Chapter 14 Spiceland 6th edition

# Chapter 14 Spiceland 6th edition - Exercise 14-2 1 Maturity...

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Unformatted text preview: Exercise 14-2 1. Maturity Interest paid Stated rate Effective (market) rate 10 years annually 10% 12% Interest \$100,000 ¥ x 5.65022 * = \$565,022 Principal \$1,000,000 x 0.32197 ** = 321,970 Present value (price) of the bonds \$886,992 ¥ 10% x \$1,000,000 * present value of an ordinary annuity of \$1: n=10, i=12% (Table 4) ** present value of \$1: n=10, i=12% (Table 2) 2. Maturity Interest paid Stated rate Effective (market) rate 10 years semiannually 10% 12% Interest \$50,000 ¥ x 11.46992 * = \$573,496 Principal \$1,000,000 x 0.31180 ** = 311,800 Present value (price) of the bonds \$885,296 ¥ 5% x \$1,000,000 * present value of an ordinary annuity of \$1: n=20, i=6% (Table 4) ** present value of \$1: n=20, i=6% (Table 2) 3. MaturityInterest paidStated rateEffective (market) rate 10 years semiannually 12% 10% Interest \$60,000 ¥ x 12.46221 * = \$ 747,733 Principal \$1,000,000 x 0.37689 ** = 376,890 Present value (price) of the bonds \$1,124,623 ¥ 6% x \$1,000,000 * present value of an ordinary annuity of \$1: n=20, i=5% (Table 4) ** present value of \$1: n=20, i=5% (Table 2) 4. Maturity Interest paid Stated rate Effective (market) rate 20 years semiannually 12% 10% Interest \$60,000 ¥ x 17.15909 * = \$1,029,545 Principal \$1,000,000 x 0.14205 ** = 142,050 Present value (price) of the bonds \$1,171,595 ¥ 6% x \$1,000,000 * present value of an ordinary annuity of \$1: n=40, i=5% (Table 4) ** present value of \$1: n=40, i=5% (Table 2) Exercise 14-2 (concluded) 5. Maturity Interest paid Stated rate Effective (market) rate 20 years semiannually 12% 12% Interest \$60,000 ¥ x 15.04630 * = \$902,778 Principal \$1,000,000 x 0.09722 ** = 97,220 Present value (price) of the bonds \$999,998 actually, \$1,000,000 if PV table factors were not rounded ¥ 6% x \$1,000,000 * present value of an ordinary annuity of \$1: n=40, i=6% (Table 4) ** present value of \$1: n=40, i=6% (Table 2) Exercise 14-7 1. Price of the bonds at January 1, 2011 Interest \$7,500,000 ¥ x 13.76483 * = \$103,236,225 Principal \$150,000,000 x 0.17411 ** = 26,116,500 Present value (price) of the bonds \$129,352,725 ¥ 5% x \$150,000,000 * present value of an ordinary annuity of \$1: n=30, i=6% (Table 4) ** present value of \$1: n=30, i=6% (Table 2) 2. January 1, 2011 Cash (price determined above)................................ 129,352,725 Discount on bonds payable (difference)............... 20,647,275 Bonds payable (face amount)............................ 150,000,000 3. June 30, 2011 Interest expense (\$7,500,000 + \$688,243)........................ 8,188,243 Discount on bonds payable (\$20,647,275 ÷ 30)........ 688,243 Cash (5% x \$150,000,000)........................................ 7,500,000 4. December 31, 2018 Interest expense (\$7,500,000 + \$688,243)........................ 8,188,243 Discount on bonds payable (\$20,647,275 ÷ 30)........ 688,243 Cash (5% x \$150,000,000)........................................ 7,500,000 [Using the straight-line method, each interest entry is the same.] Exercise 14-9...
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## This note was uploaded on 09/20/2011 for the course ACCT 4120 taught by Professor Franz during the Spring '11 term at Toledo.

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Chapter 14 Spiceland 6th edition - Exercise 14-2 1 Maturity...

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