Question - Bond issue price and premium amortization
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 of 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
(A) Calculate the issue price of the bonds?
(B) Without prejudice to your solution in part (A), assume that the issue price was $2,652,000. Prepare the amortization table for 2015, assuming that amortization is recorded on interest payment dates using the effective-interest method?