On January 2, Year 1, the Lyndhurst Company Inc. a privately-held company, issued $1,000,000, five-year, 10% bonds, dated January 2, Year 1. The bonds provided for semiannual interest payments to be made on June 30 and December 31 of each year. Terms of the bond indenture allowed the company to call the bonds at 102 after one year. The bonds were issued when the market interest rate was 8%.

•	Lyndhurst uses the effective interest method for amortizing bond discounts and premiums.
•	The bonds are term bonds that mature on December 31, Year 5.
•	Lyndhurst's fiscal year for financial reporting purposes is December 31.
•	The company called the bonds at 102 on June 30, Year 2.

Use the following spreadsheet to calculate the present values of the principal and interest cash flows related to the bonds, and the resulting bond issue price. For each associated cell in columns B and D, enter the appropriate figures as whole numbers. For cells C2 and C3, enter the amortization interest rate (as a percentage). For column E, find the appropriate time value factors in the references located in the exhibits and enter those into the associated cells. The spreadsheet will automatically calculate the bond issue price based on your entries (cell F4).

 

Present Value Interest Fa... Future Value Present Value A C D E F Compounding Payment Present Payment Type Period(s) Interest Rate Amount Factor Value Principal 123 123 123 123 Interest 123 123 123 123 Bond Issue Price