Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In this assignment you will be working with bonds. You will compute bond issue price, then make an amortization table. You will then do a
In this assignment you will be working with bonds. You will compute bond issue price, then make an amortization table. You will then do a few select journal entries using your amortization table.
Here is the data:
- Bond issue principal amount: 800,000
- Semi-annual interest payments at the end of every six months
- Term = 6 years
- Stated rate = 6%
- Interest payment = ?
Scenarios:
- Market rate = 4%
- Market rate = 6%
- Market rate = 8%
Requirements:
For each of the three scenarios, complete a separate tab in Excel. Include the data for your problem in each sheet. Then:
- Compute the interest payment. It is the same amount in each scenario.
- Compute bond issue price
- Create an amortization table using the effective interest method for all 12 payment periods.
- Below your Effective Interest amortization table show journal entries for:
- Bond Issue
- First payment (payment at end of period 1)
- Payment at the end of the 6th period.
- Settlement of the bond after last payment. Note: do not include the final payment journal entry; only include the entry for the settlement of bon
- For the instances that have a discount or a premium (scenarios 1 and 3) do the following:
- Below your journal entries, create an amortization table using the same bond issue price as you did in step 2 above. Use the straight-line method of amortization for this second table (see chapter 14 appendix).
- Below your straight-line amortization table show journal entries for:
- First payment (payment at end of period 1)
- Payment at the end of the 6th period.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started