Problem:
On January 1, 2008, Langly Co. issued ten-year bonds ith a face value of $1,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table value 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 10%................... 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
a. Calculate the issue price of the bonds.
b. Without prejudice to your solution in part (a), assume that the issue price was $ 884,000. Prepare the amortization table for 2008, assuming that amortization is recorded on interest payment dates.
Date Cash Expense Amortization Carryin Amount
1/1/08
6/30/08
12/31/08