Cas h pay ment 45 fac e amount 1 2 3 4 5 6 7 8 4500

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Unformatted text preview: (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + 404) 404) 404) 404) 404) 404) 404) 404) = = = = = = = = 36,000 Inc reas e in Balanc e $3,232 ÷ 8 4,904 4,904 4,904 4,904 4,904 4,904 4,904 4,904 404 404 404 404 404 404 404 404 39,232 Outs tanding Balanc e 96,768 97,172 97,576 97,980 98,384 98,788 99,192 99,596 100,000 3,232 3. (effec tive interes t) Interes t ex pens e (5% × $98,226) = 4,911 Cas h (4.5% × $100,000) = 4,500 (s traight-line) Interes t ex pens e ($4,500 + 404) = 4,904 Dis c ount on bonds pay able ($3,232 ÷ 8) = 404 Cas h (4.5% × $100,000) = 4,500 5. The amortiz ation s c hedule in requirement 1 gives us the pres ent value, whic h repres ents fair value s inc e the mark et rate s till is 10% . The outs tanding debt balanc e after the June 30, 2015, interes t pay ment (line 5) is the pres ent value at that time ($98,637) of the remaining pay ments . Sinc e $10,000 fac e amount of the bonds is 10% of the entire is s ue, we tak e 10% of the table amount to arrive at $9,864. This c an be c onfirmed by c alc ulating the pres ent value: ezto.mhecloud.mcg r aw- hill.com/hm_accounting .tpx?todo= pr intviewSing le 4/5 2/25/14 Assig nment Pr int View Interes t Princ ipal $450¥ × 2.72325* $10,000 × 0.86384** Pres ent value (pric e) of the bonds = $ 1,225 = 8,638 $ 9,864 (rounded) ¥ 4. 5% × $10, 000 *pres ent value of an ordinary annuit y of $1: n = 3, i = 5% (PVA of $1) **pres ent value of $1: n = 3, i = 5% (PV of $1) ezto.mhecloud.mcg r aw- hill.com/hm_accounting .tpx?todo= pr intviewSing le 5/5...
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This homework help was uploaded on 03/22/2014 for the course ACC 3000 taught by Professor He during the Fall '09 term at CUNY Baruch.

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