Bond Analysis
Brass, Inc. issued 4 Year Bonds on January 1, 2014 with a face value of $100,000, with interest paid annually. The face/stated rate of the bonds is 12% and the market rate is 10%. The principal is due in four years.
Calculate the Bond Issuance, the Journal Entries for January 1, 2014 and December 31, 2014, and the Effective Amortization Table-(Next Page). Is this a Discount or a Premium to the Bonds?
TO CALCULATE THE BOND ISSUE-USE THE FOLLOWING TABLE
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To Calculate Bond Issue Price – Present Value of Interest Payments + Present Value of Principal |
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PV of Principal |
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Bond Issue Price |
Journal Entry
1/1/2014-
Journal Entry
12/31/2014-
(CONTINUED ON NEXT PAGE)
COMPLETE THE FOLLOWING EFFECTIVE AMORTIZATION TABLE FOR PROBLEM 5:
DATE COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
1/1/2014 12% Face Rate 10% Market Rate Premium Amortized Carrying Value
Cash Interest Interest Expense Column 1-Column 2
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12/31/2014 |
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12/31/2015 |
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12/31/2016 |
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12/31/2017 |
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