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Assume that the following information is relevant for one of the bond issues of Vernon Company: Item Value Face Value $500,000 Bond Term 10 Years Stated Interest Rate (paid Semiannually) 12.00% Market Interest Rate 1 9 .00% Issue Date 1/1/2014 Interest Payment dates each year Jun 30 & Dec 31 Present Value Factors: Present value of 1 for 10 periods: Present value of 1 for 20 periods: Present Value Factors: Present value of annuity for 10 periods: Present value of annuity for 20 periods: 4.5% 0.644 0.415 4.5% 7.913 6% 0.558 0.312 6% 7.360 11.470 12% 0.322 0.104 9% 0.422 0.178 9% 6.418 .129 129 5.650 13.008 9 7.469 Use effective interest rate method HINT: 1. + Market Rate by 2 2. Multiply Bond Term by 2 3. Calculate the "STATED" Annual Interest Pmt 4. + Annual Interest Pmt by 2 = Annuity Amt 5. Calculate FLOW #1 = PV of 1 Use effective interest rate method HINT: 1. + Market Rate by 2 2. Multiply Bond Term by 2 3. Calculate the "STATED" Annual Interest Pmt 4. + Annual Interest Pmt by 2 = Annuity Amt 5. Calculate FLOW #1 = PV of 1 6. Calculate FLOW #2 = PV of Annuity On January 1, 2014, the amount the bonds should sell for is: O A$ 597,740. OB. $ 500,100 c. None of the above D. $ 546,240. O E. $ 276,070. The total amount of interest to be paid in cash over the life of the bonds is: AS 300,000 B. $ 1,200,000 C$ 900,000 D. None of the above E$ 450,000 The net bond payable amount on the balance sheet after the first interest payment on June 30, 2014 is: CA$ 592,300,80 B$ 496,823.30. C. None of the above. D. $281,509 20 ES594,638.30