Copy of ACCT 305 Live Lecture Excel Week 6

Copy of ACCT 305 Live Lecture Excel Week 6 - CALCULATING...

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Unformatted text preview: CALCULATING PRICE OF BONDS FACTS Face value $10 Million bond Stated rate 6% Market rate 8% Maturity 5 years Interest paid Annually REQUIREDCalculate price of bond and record journal entry SOLUTIONStep 1 Calculate present value of bond i 0.08 (market rate) n 5 FV 10,000,000 PV $6,805,832 Step 2 Calculate present value of an annuity i 0.08 (market rate) n 5 PMT 600,000 (10M x 6%) PV of OA $2,395,626 Step 3 Sum the two answers Present value $6,805,832 Present value of ordinary annuity $2,395,626 $9,201,458 Step 4 Journal entry Cash 9,201,458 Discounts on bonds payable 798,542 Bonds payable 10,000,000 CALCULATING PRICE OF BONDS FACTS Face value $10 Million bond Stated rate 6% Market rate 8% Maturity 5 years Interest paid Semi-annually REQUIREDCalculate price of bond and record journal entry SOLUTION Note: Since interest is paid semi-annually, interest compou Step 1 Calculate present value of bond...
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Copy of ACCT 305 Live Lecture Excel Week 6 - CALCULATING...

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