Question
On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when the market rate was 2% for a cash price
On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity value, 3% coupon bonds when the market rate was 2% for a cash price of $4,994 million. Interest was payable semi-annually on Dec. 31 and June 30. ABC also issued $3,527 million face value, 20-year, zero coupon bonds on July 1, 2017, that matured on June 30, 2037, for a cash price of $2,619million. The effective market interest rate at issuance was 1.5%. ABC repurchased $1,143 million face value coupon bonds on June 30, 2020 for $1,220 million cash (after interest was paid) and $582 million in face value of the zero-coupon bonds on June 30, 2021 for a purchase price of $432 million cash.
At the end of June 30, 2020, what was the book value of the coupon bonds before the repurchase transaction? At the end of June 30, 2021, what was the book value of the zero-coupon bond before the repurchase transaction? Name the two accounts and their respective balances from the Balance Sheet that combine to determine the book value for each bond.
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