Accounting for Bonds using Amortized Cost Measurement Based on the Historical Market Interest Rate
O'Brien Corporation issues $8,000,000 face value, 8% semiannual coupon bonds maturing in 20 years. The market initially prices these bonds to yield 4% compounded semiannually. O'Brien Corporation accounts for these bonds using amortized cost measurement based on the historical market interest rate.
See the Present and Future Value Tables from the Appendix for help in solving this item. Round your final answers to the nearest dollar.
a. The issue price of these bonds is $ .
b. The interest expense on these bonds for the first six months is $ .
c. The interest expense on these bonds for the second six months is $ .
d. The carrying value at the end of the second six-month period is $ .
e. Use present value computations to verify the carrying value of the bonds at the end of the second six-month period as computed in part d. $
Future Value of $1 P (1 r)" TABLE 1 interest rate; n number of periods until valuation P $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 10% 12% 15% 20% 25% 1.15000 1.01500 02000 1.03000 1.04000 1.05000 1.06000 1.07000 1.08000 1.10000 1.12000 1.20000 1.01000 01003 02010 1.03023 04040 06090 1,08160 1.10250 1.12360 1.14490 1.16640 1.21000 1.25440 1.32250 1.44000 56250 1.95313 01508 1.03030 1.04568 1.0612 1.09273 1.12486 1.15763 1.19102 1.22504. 1.2597 1.33100 1.40493 1.52088 1.72800 2.07360 02015 04060 1.06136 08243 1.1255 1.16986 2155 1.26248 1.31080 1.36049 1.46410 1.57352 7490 2.4414 1.15927 1.21665 1.27628 1.33823 1.40255 1.46933 1.6105 76234 2.01136 2.48832 3.05176 0510 1.07728 10408 1.12616 1.19405 1.34010 1.41852 1.50073 1.58687 1.77156 2.31306 2.98598 3.81470 03038 06152 09344 1.26532 2.21068 4.76837 03553 07214 10984 1.14869 1.22987 1.31593 1.40710 1.50363 60578 1.71382 94872 2.66002 3.58318 3.05902 4.29982 5.96046 1.04071 08286 1.12649 1.17166 26677 1.36857 47746 1.59385 1,71819 1.85093 2.14359 2.47596 1.19509 30477 1.55133 1.83846 1.99900 2.35795 77308 3.51788 5.15978 7.45058 0459 09369 1.14339 1.4233 1.68948 1.05114 0462 2.59374 6.19174 9.31323 1.16054 1.21899 1.34392 1.48024 1.62889 1.79085 96715 2.15892 3.10585 4.04556 1.11567 2.85312 3.47855 65239 7.43008 1.64153 1.05640 1.17795 1.24337 38423 1,53945 1.71034 1.89830 2.10485 2.33164 11 06168 2683 1.19562 26824 42576 1.60103 1.79586. 2.01220 2.25219 2.51817 3.13843 3.89598 5.35025 8.91610 14.55192 06699 13809 1.21355 46853 1.66507 2.13293 2.40985 2.71962 3.45227 4,36349 6.15279 10.69932 18.18989 07232 4947 1.23176 1.31948 51259 1.73168 97993 2.26090 2.57853 2.93719 4.887 7.07571 12.83918 22.73737 79750 3.17217 07768 16097 1.25023 34587 55797 1.80094 2.07893 2.39656 2.75903 17725 5.47357 8.13706 15.40702 28.42171 08307 1.26899 37279 6047 1.87298 2.18287 2.54035 2.95216 3.42594 4.59497 6.13039 9.35762 848843 35.52714 2.69277 3.70002 5.05447 10.76126 22.186 44.40892 17 08849 8430 1.28802 ,40024 65285 1.94790 2.29202 3.15882 6.86604 09393 9615 1.30734. 42825 70243 2.02582 2.40662 2.85434 3.37993 3.99602 5.55992 7.68997 12.37545 26.62333 55.51115 2.10685 6.1159 8.61276 14.23177 1.94800 69.38894 1.09940 1.20811 1.32695 4568 7535 2.52695 3.02560 3.61653 4.31570 1.10490 22019 1.34686 48595 2.19112 2.65330 3.20714 3.86968 4.66096 6.72750 9.64629 16.36654 38.33760 86.73617 1.11597 24472 1.38756 1.54598 1,91610 2.36992 2.92526 3.60354 5.43654 8.14027 12.1003 21.64475 55.20614. 135.5253 4.43040 24 1.12718 26973 42950 1.60844. 2.03279 2.56330 3.22510 4.04893 5.07237 6.34118 9.84973 5.17863 28.62518 79.49685 211.7582 2.15659 2.77247 3.55567 5.80735 7.39635 91818 9.04007 37.85680 14.4755 330.8722 1.13846 29526 4727 1.67342 4,54938 28 1.14987 .32129 1.51722 1.74102 2.28793 2.99870 3.92013 5.11169 6.64884 8.627 4.42099 23.88387 50.0656 64.8447 516.9879 1.16140 34785 56308 .81136 2.42726 3.24340 4.32194. 5.74349 7.61226 0,06266 44940 29,95992 66.21177 237.3763 807.7936 1.73708 87.56507 341.8219 1262.177 1.17304 37494 61032 1.88454 2.57508 3.50806 4.76494. 6.45339 8.71527 378 37.58173 1.40258 2.7319 3,79432 5.25335 7.25103 9.97811 3.69013 25.54767 47.14252 5.80480 492.2235 1972.152 1.18480 65900 96068
