Metro Company purchased $500,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The market interest rate (yield) was 8% for bonds of similar risk and maturity. The market value on December 31, 20x1 was $555,000 and all bonds were sold for $507,500 on January 1, 20x2 after the second payment. On the 1st schedule, how do you get to the $540,554 issue price of bonds (multiply times a PV factor?). And also the 525,000 & 354,671 amounts?
I. Metro Company purchased $500,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The market interest rate (yield) was 8% for bonds of similar risk and maturity. The market value on December 31, 20x1 was $555,000 and all bonds were sold for $507,500 on January 1, 20x2 after the second payment.
On the 1st schedule, how do you get to the $540,554 issue price of bonds (multiply times a PV factor?). And also the 525,000 & 354,671 amounts?
Bonds are the financial instruments that are used by an entity to borrow funds from the financial market. It is a contract that states the terms and conditions related to the funds borrowed.
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