Problem 14-4 Bond amortization schedule [LO14-2]

On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:

Payment		Cash Payment		Effective Interest		Increase in Balance		Outstanding Balance
								4,893,518
1		280,000		293,611		13,611		4,907,129
2		280,000		294,428		14,428		4,921,557
3		280,000		295,293		15,293		4,936,850
4		280,000		296,211		16,211		4,953,061
5		280,000		297,184		17,184		4,970,245
6		280,000		298,215		18,215		4,988,460
~		~		~		~		~
~		~		~		~		~
~		~		~		~		~
38		280,000		397,547		117,547		6,743,328
39		280,000		404,600		124,600		6,867,928
40		280,000		412,072		132,072		7,000,000

Required: 1. What is the face amount of the bonds? 2. What is the initial selling price of the bonds? 3. What is the term to maturity in years? 4. Interest is determined by what approach? 5. What is the stated annual interest rate? 6. What is the effective annual interest rate? 7. What is the total cash interest paid over the term to maturity? 8. What is the total effective interest expense recorded over the term to maturity?