Accounting, bonds

Question

A company issued 10- year 8% bonds with a Face Value of $200,000 on January 1, 20Y1 for $188,500. The Bonds pay interest Semi- annually. Determine the Carrying Value of the Bonds on January 1, 20Y3.

Answer 1

Step 1: We don't know the market rate of interest so we must solve for that given that we have all of the other inputs Payment, Stated Rate PV and FV

Step 2: We must solve for payment

Payment= Face value times stated rate (here we divide the stated rate by 2 since its semiannual)

Payment= (200,000)(.08/2)

Hence Payment= $8000

Now lets solve for market rate

N= 20 (10 years times 2 periods) I= Solve Payment = 8000 PV= -188,500 FV= 200,000

Hence we get the semiannual market rate as 4.4397%

Now we can do the table

Beg CV*MR (4.4397) (int exp-cash) (Beg CV+ AMort)

Date Beg CV Int Exp Cash Payment Amortization Ending CV

Jan 2001 $188,500

June 2001 188,500 $8368.83 8000 368.83 $188,868.83

Dec 2001 188,868,83 $8385.21 8000 385.21 $189,254.04

June 2002 189,254.04 $8402.31 8000 402.31 $189,656,36

Dec 2002 $189,656,35 $8420,7 8000 420.17 $190,076.53

Hence the CV at January 2003 would be the end one at Dec 2002 of $190,076.53

DM me if any questions I have a full amortization table of all 20 periods wont let me attach I can walk you through it

Tried to organize the table messed up here would love to send you the spreadsheet