On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $6,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% Present value of 1 for 10 periods at 12% Present value of 1 for 20 periods at 5% Present value of 1 for 20 periods at 6% Present value of annuity for 10 periods at 10% .386 .322 .377 .312 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Instructions (a) Calculate the issue price of the bonds. (b) Without prejudice to your solution in part (a), assume that the issue price was $4,520,000. Prepare the amortization table for 2018, assuming that amortization is recorded on interest payment dates using the effective-interest method.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2018, Piper Co. issued ten-year bonds with a
face value of $6,000,000 and a stated interest rate of 10%,
payable semiannually on June 30 and December 31. The bonds
were sold to yield 12%. Table values are:
Present value of 1 for 10 periods at 10%
Present value of 1 for 10 periods at 12%
Present value of 1 for 20 periods at 5%
Present value of 1 for 20 periods at 6%
Present value of annuity for 10 periods at 10%
.386
.322
.377
.312
6.145
Present value of annuity for 10 periods at 12%
5.650
Present value of annuity for 20 periods at 5%
12.462
Present value of annuity for 20 periods at 6%
11.470
Instructions
(a)
Calculate the issue price of the bonds.
(b)
Without prejudice to your solution in part (a), assume
that the issue price was $4,520,000. Prepare the amortization
table for 2018, assuming that amortization is recorded on
interest payment dates using the effective-interest method.
Transcribed Image Text:On January 1, 2018, Piper Co. issued ten-year bonds with a face value of $6,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% Present value of 1 for 10 periods at 12% Present value of 1 for 20 periods at 5% Present value of 1 for 20 periods at 6% Present value of annuity for 10 periods at 10% .386 .322 .377 .312 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Instructions (a) Calculate the issue price of the bonds. (b) Without prejudice to your solution in part (a), assume that the issue price was $4,520,000. Prepare the amortization table for 2018, assuming that amortization is recorded on interest payment dates using the effective-interest method.
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