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On January 1, 2013, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the...

On January 1, 2013, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

Payment Cash
Payment
Effective
Interest
Increase in Balance Outstanding
Balance
6,221,759
1 356,000 373,306 17,306 6,239,065
2 356,000 374,344 18,344 6,257,409
3 356,000 375,445 19,445 6,276,854
4 356,000 376,611 20,611 6,297,465
5 356,000 377,848 21,848 6,319,313
6 356,000 379,159 23,159 6,342,472
~ ~ ~ ~ ~
~ ~ ~ ~ ~
~ ~ ~ ~ ~
38 356,000 505,452 149,452 8,573,656
39 356,000 514,419 158,419 8,732,075
40 356,000 523,925 167,925 8,900,000
Required:
1. What is the face amount of the bonds?

2. What is the initial selling price of the bonds?

3. What is the term to maturity in years?

4. Interest is determined by what approach?
Effective interest rate
Straight-line approach

5. What is the stated annual interest rate?

6. What is the effective annual interest rate?

7. What is the total cash interest paid over the term to maturity?

8.

What is the total effective interest expense recorded over the term to maturity?

Top Answer

1. $8,900,000 - the final balance after the 40 th payment. 2. $6,221,759 - the original balance before the first payment is... View the full answer

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