I. On June 30, 2013, Singleton Computers issued 7% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2028 (15 years). The market rate of interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on December 31, 2013. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
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Required:
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1.
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Determine the price of the bonds on June 30, 2013. (Enter your answers in whole dollars.)
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2.
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Calculate the interest expense Singleton reports in 2013 for these bonds using the effective interest method. (Enter your answers in whole dollars.)
II.
Lincoln Company purchased merchandise from Grandville Corp. on September 30, 2013. Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of $5,600 on each September 30, beginning on September 30, 2016. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided.)
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Required:
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Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30, 2013, assuming that an interest rate of 8% properly reflects the time value of money in this situation.
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