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 6,047,387 1 292,000 302,369 10,369 6,057,756 2 292,000 302,888 10,888 6,068,644 3 292,000 303,432 11,432 6,080,076 4 292,000 304,004 12,004 6,092,080 5 292,000 304,604 12,604 6,104,684 6 292,000 305,234 13,234 6,117,918 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 292,000 355,060 63,060 7,164,267 39 292,000 358,213 66,213 7,230,480 40 292,000 361,520 69,520 7,300,000 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 6,047,387 1 292,000 302,369 10,369 6,057,756 2 292,000 302,888 10,888 6,068,644 3 292,000 303,432 11,432 6,080,076 4 292,000 304,004 12,004 6,092,080 5 292,000 304,604 12,604 6,104,684 6 292,000 305,234 13,234 6,117,918 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 38 292,000 355,060 63,060 7,164,267 39 292,000 358,213 66,213 7,230,480 40 292,000 361,520 69,520 7,300,000 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 |
|||||
| 6,047,387 | |||||||||
| 1 | 292,000 | 302,369 | 10,369 | 6,057,756 | |||||
| 2 | 292,000 | 302,888 | 10,888 | 6,068,644 | |||||
| 3 | 292,000 | 303,432 | 11,432 | 6,080,076 | |||||
| 4 | 292,000 | 304,004 | 12,004 | 6,092,080 | |||||
| 5 | 292,000 | 304,604 | 12,604 | 6,104,684 | |||||
| 6 | 292,000 | 305,234 | 13,234 | 6,117,918 | |||||
| ~ | ~ | ~ | ~ | ~ | |||||
| ~ | ~ | ~ | ~ | ~ | |||||
| ~ | ~ | ~ | ~ | ~ | |||||
| 38 | 292,000 | 355,060 | 63,060 | 7,164,267 | |||||
| 39 | 292,000 | 358,213 | 66,213 | 7,230,480 | |||||
| 40 | 292,000 | 361,520 | 69,520 | 7,300,000 | |||||
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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