On January 1, 2015, Piper Co. issued ten-year bonds with a face value of $3,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Present value of 1 for 10 periods at 10% .......................................... .386
Present value of 1 for 10 periods at 12% .......................................... .322
Present value of 1 for 20 periods at 5% ............................................ .377
Present value of 1 for 20 periods at 6% ............................................ .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
Instructions
(a) Calculate the issue price of the bonds.
(b) This question is independent from the answer in A above. Assume that the issue price was $2,652,000 and all other information in the problem is the same. Prepare the amortization table for 2015 only, assuming that amortization is recorded on interest payment dates using the effective-interest method.