On January 1, 2021, Sheridan Co. issued ten-year bonds with a face value of $4,500,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:Present value of 1 for 10 periods at 10% 0.386 Present value of 1 for 10 periods at 12% 0.322 Present value of 1 for 20 periods at 5% 0.377 Present value of 1 for 20 periods at 6% 0.312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Issue price of bond

Answered: On January 1, 2021, Sheridan Co. issued…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

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On January 1, 2021, Sheridan Co. issued ten-year bonds with a face value of $4,500,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:

Present value of 1 for 10 periods at 10%		0.386
Present value of 1 for 10 periods at 12%		0.322
Present value of 1 for 20 periods at 5%		0.377
Present value of 1 for 20 periods at 6%		0.312
Present value of annuity for 10 periods at 10%		6.145
Present value of annuity for 10 periods at 12%		5.650
Present value of annuity for 20 periods at 5%		12.462
Present value of annuity for 20 periods at 6%		11.470

Issue price of bond

Expert Solution

Step 1

Bonds are instrument issued by company acknowledging the debt raised by company . It is a liability to be paid after certain period of time with interest.

10% bonds payable means that interest is payable at the rate of 10% per annum.

Since , interest is paid on semi annual basis , so the interest paid to bond holder on semi annual basis will be :-

Interest = 45,00,000 * 10% * 6/12 = 225,000

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