HWK #9 SS23 Solution

.xlsx

School

Michigan State University *

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Course

311

Subject

Accounting

Date

Feb 20, 2024

Type

xlsx

Pages

6

Uploaded by nathangardner35

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Part A (1) Determine the proceeds of the bond sale on 1/1/2023 Face value 3,000,000 Bond rate 10% Effective interest 8% Coupon payment 300,000 Payment period 6 PV $3,277,372.78 (2) Calculate present value of the bond by using present value tables Step1: Layout of the payment Time 12/31/2023 12/31/2024 12/31/2025 Coupon payment 300,000 300,000 300,000 Principal payment Step2 : Find the discount factor by using the table and perform calculation PV of principal 1,890,600.00 i PV of coupon 1,386,870.00 i Sum of PV 3,277,470.00 Difference due to rounding 97.22 (3) Did the bond sell at the premium or discount? The bond is sold at premium. We can tell this by (1) comparing the face value of the bond to th (4) Produce amortization schedule Year Interest Expense Coupon payment Amortized premium 1/1/2023 12/31/2023 $262,189.82 300,000 $37,810.18 12/31/2024 $259,165.01 300,000 $40,834.99 12/31/2025 $255,898.21 300,000 $44,101.79 12/31/2026 $252,370.07 300,000 $47,629.93 12/31/2027 $248,559.67 300,000 $51,440.33 12/31/2028 $244,444.44 300,000 $55,555.56 Total $1,522,627.22 1,800,000 $277,372.78 $3,277,372.78 $3,000,000.00
(5) Journal entries (1) Initial Sale Cash 3,277,372.78 Premium on B/P 277,372.78 Bond payable 3,000,000.00 (2) First interest payment Interest Expense 262,189.82 Premium on B/P 37,810.18 Cash 300,000.00 (3) Payment at maturity Interest Expense $244,444.44 Premium on B/P $55,555.56 Cash 300,000.00 $300,000.00 Bond payable 3,000,000.00 Cash $3,000,000.00 (6) T Account Date Bond 1/1/2022 3,000,000.00 Bond Premium 277,372.78 37,810.18 $40,834.99 198,727.61 Net bond Payable as of 12/31/2024 $3,198,727.61
12/31/2026 12/31/2027 12/31/2028 300,000 300,000 300,000 3,000,000 0.6302 Using present value table with r=8% and n=6 4.6229 Using annuity table with r=8% and n=6 he present value or (2) comparing bond rate to effective rate Book value of bond $3,277,372.78 <----This is the PV of the bond at issuance $3,239,562.60 $3,198,727.61 $3,154,625.82 $3,106,995.88 $3,055,555.56 $3,000,000.00 Amortization (Credit) <----Double checking the total amortization amount Tie out
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