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E1114 a facevalue 100000 presentvaluei3n20 pv

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Unformatted text preview: , –SE) 18,378.56a Discount on Bonds Payable 3,378.56c Interest Payable (+L) 15,000.00b Accrued interest payable. (+L) a $18,378.56 = Book Value Effective Rate per Period = $459,464 4% b $15,000.00 = Face Value Stated Rate per Period = $500,000 3% c $3,378.56 = $18,378.56 – $15,000.00 c. Balance sheet value as of 12/31/12 = Face value – Discount as of 12/31/12 = $500,000.00 – ($40,536.00 – $3,378.56) = $462,842.56 d. Present value (i = 4%, n = 9) PV of face value ($500,000 0.7026 from Table 4 in Appendix A) PV of interest payments ($15,000 7.4353 from Table 5 in Appendix A) Total present value $ $ 351,300.00 111,530.00 462,830.00 Notice that the $462,842.56 from part [c] is essentially identical to the $462,830.00 just calculated. Amortizing discounts and premiums using the effective interest rate results in bonds being carried on the balance sheet at an amount equal to the present value of the bonds, using the effective interest rate on the date the bonds were issued as the discount rate. E11–14 a. Face value $ 100,000 Present value (i = 3%, n = 20) PV of face value ($100,000 0.55368 from Table 4 in Appendix A) 55,368 PV of interest payments ($4,000 14.87747 from Table 5 in Appendix A) 59,510 Total present value 114,878 Premium 14,878 E11–14 $ $ Concluded Cash (+A) 114,878 Premium on Bonds Payable (+L) Bonds Payable (+L) 14,878 100,000 Issued bonds. b. Interest Expense (E, –SE) Premium on Bonds Payable (­L) 3,446.34a 553.66c Interest Payable (+L) 4,000.00b Accrued interest payable. a $3,446.34 = Book Value Effective Rate per Period = $114,878 3% b $4,000.00 = Face Value Stated Rate per Period = $100,000 4% c $553.66 = $4,000.00 – $3,446.34 c. Balance sheet value as of 12/31/12 = Face value + Premium as of 12/31/12 = $100,000.00 + ($14,878.00 – $553.66) = $114,324.34 d. Present value (i = 3%, n = 19) PV of face value ($100,000 0.57029 from Table 4 in Appendix A) PV of interest payments ($4,000 14.3238 from Table 5 in Appendix A) Total present value $ $ 57,029.00 57,295.20 114,324.20 Notice that the $114,324.3...
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