Please explain how to arrive at the "Market Price of Bonds (% of face) = 94.285%" section in the excel sheet.
Please explain how to arrive at the "Market Price of Bonds (% of face) = 94.285%" section in the excel sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please explain how to arrive at the "Market Price of Bonds (% of face) = 94.285%" section in the excel sheet.

Transcribed Image Text:Haiku Inc. issued $600,000 of 10-year bonds with a stated
rate of 11% when the market rate was 12%. The bonds pay
interest semi-annually. Assume that the bonds were issued
for $565,710. Prepare an amortization table for the first
three payments.
Semiannual
Semiannual
Semiannual .
Amortization
Interest
Interest
Interest Expense
Discount
Period
Payment
$33.943
$33,000
$943
BONDS PAYABLE - EFFECTIVE-INTEREST AMORTIZATION METHOD - DISCOUNT (HW-02, #1)
Semiannual
Bond Discount
Beginning
Interest Period Carrying Value Interest Expense
Semiannual
Semiannual
Unamortized
Ending Carry
Interest Cash
Amortized
Bond Discount
Value
Payment
34,290
565,710
1
565,710
33,943
33,000
943
33,347
566,653
2
566,653
33,999
33,000
999
32,348
567,652
3
567,652
34,059
33,000
1,059
31,289
568,711
Bond Face Value =
$600,000
%3D
Annual Interest Rate =
11.0%
Time Period - Semiannual (years) =
0.5
Market Price of Bonds (% of Face) =
94.285%
Current Market Interest Rate =
12.0%
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