On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interest at the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature on January 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date and there is therefore no accrued interest for Ayayai to pay on January 1. Ayayai has an August 31 year end. (a) How was the price determined? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimal places e.g. 58,971.) Present value of maturity value Present value of interest payments Price of the bonds $ $ $
On January 1, 2023, Ayayai Limited pays $110,522 to purchase $125,000 of Chan Corporation 7% bonds. The market rate of interest at the time was 10%. Ayayai accounts for this investment at amortized cost using the effective interest method. The bonds mature on January 1, 2028, and interest is payable each July 1 and January 1. Note that the bond is acquired on an interest payment date and there is therefore no accrued interest for Ayayai to pay on January 1. Ayayai has an August 31 year end. (a) How was the price determined? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to O decimal places e.g. 58,971.) Present value of maturity value Present value of interest payments Price of the bonds $ $ $
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1MC
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