On January 1, 2021, 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 7,218,650 1 270,000 288,746 18,746 7,237,396 2 270,000 289,496 19,496 7,256,892 3 270,000 290,276 20,276 7,277,168 4 270,000 291,087 21,087 7,298,255 5 270,000 291,930 21,930 7,320,185 6 270,000 292,807 22,807 7,342,992 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 270,000 350,010 80,010 8,830,251 39 270,000 353,210 83,210 8,913,461 40 270,000 356,539 86,539 9,000,000 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?
On January 1, 2021, 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 7,218,650 1 270,000 288,746 18,746 7,237,396 2 270,000 289,496 19,496 7,256,892 3 270,000 290,276 20,276 7,277,168 4 270,000 291,087 21,087 7,298,255 5 270,000 291,930 21,930 7,320,185 6 270,000 292,807 22,807 7,342,992 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 270,000 350,010 80,010 8,830,251 39 270,000 353,210 83,210 8,913,461 40 270,000 356,539 86,539 9,000,000 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?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 32CE: Cornerstone Exercise Bonds Issued at a Discount (Effective Interest) Refer to the information for...
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On January 1, 2021, 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 |
|||||
7,218,650 | |||||||||
1 | 270,000 | 288,746 | 18,746 | 7,237,396 | |||||
2 | 270,000 | 289,496 | 19,496 | 7,256,892 | |||||
3 | 270,000 | 290,276 | 20,276 | 7,277,168 | |||||
4 | 270,000 | 291,087 | 21,087 | 7,298,255 | |||||
5 | 270,000 | 291,930 | 21,930 | 7,320,185 | |||||
6 | 270,000 | 292,807 | 22,807 | 7,342,992 | |||||
~ | ~ | ~ | ~ | ~ | |||||
~ | ~ | ~ | ~ | ~ | |||||
~ | ~ | ~ | ~ | ~ | |||||
38 | 270,000 | 350,010 | 80,010 | 8,830,251 | |||||
39 | 270,000 | 353,210 | 83,210 | 8,913,461 | |||||
40 | 270,000 | 356,539 | 86,539 | 9,000,000 | |||||
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?
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