Cron Corporation is planning to issue bonds with a face value of $700,000 and a coupon rate

Question:

Cron is planning to issue bonds with a of $700,000 and a rate of 13 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Cron uses the effective-interest amortization method. Assume an annual market rate of interest of 12 percent.
Required:
1. What was the issue price on January 1 of this year?
2. What amount of interest expense should be recorded on June 30 and December 31 of this year?
3. What amount of cash should be paid to investors June 30 and December 31 of this year?
4. What is the book value of the bonds on June 30 and December 31 of this year?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...