Discount-Mart issues $17 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $15, 050,113 $ 15,050,113 06/30/2021 $850,000 903,007 53, 007 $15, 103,120 12/31/2021 850,000 906,187 56, 187 15,159,307 06/30/2022 850,000 909,558 59, 558 15,218,865 12/31/2022 850,000 913,132 63, 132 15,281,997 What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)
Discount-Mart issues $17 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $15, 050,113 $ 15,050,113 06/30/2021 $850,000 903,007 53, 007 $15, 103,120 12/31/2021 850,000 906,187 56, 187 15,159,307 06/30/2022 850,000 909,558 59, 558 15,218,865 12/31/2022 850,000 913,132 63, 132 15,281,997 What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 4EB: Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market...
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Discount-Mart issues $17 million in bonds on January 1, 2021. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
| Date | Cash Paid | Interest Expense |
Increase in Carrying Value |
Carrying Value |
||||||||
| 01/01/2021 | $15, 050,113 | $ | 15,050,113 | |||||||||
| 06/30/2021 | $850,000 | 903,007 | 53, 007 | $15, 103,120 | ||||||||
| 12/31/2021 | 850,000 | 906,187 | 56, 187 | 15,159,307 | ||||||||
| 06/30/2022 | 850,000 | 909,558 | 59, 558 | 15,218,865 | ||||||||
| 12/31/2022 | 850,000 | 913,132 | 63, 132 | 15,281,997 | ||||||||
What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.)
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