On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that. pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:

Question

Business

Aldo Gates

7 October, 14:30

On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that. pay interest semiannually on January 1 and July 1. The bond issue price is $3,197,389 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,087 every six months. The company's December 31, Year 1 balance sheet should reflect total liabilities associated with the bond issue in the amount of:

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Rebekah Arellano · Answer 1

We are given:

Bond Value = $3,500,000

Bond Interest rate = 7%

Semi-annual

Bond Issue Price = $3,197,389

Market Interest Rate = 8%

Amortization (semi-annual) = $10,087

To determine the total liabilities associated with the bond, we need to convert the bond value to an amortization and add it with the existing amortization.

We may use bond formula from economics.:

Bond Value = Coupon * (1 - (1 / (1+r) ^t) / r) + F / (1 + r) ^t

Input the values and solve for F.