On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on...
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Accounting
On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:
Payment
Cash Payment
Effective Interest
Increase in Balance
Outstanding Balance
5,774,920
1
216,000
230,997
14,997
5,789,917
2
216,000
231,597
15,597
5,805,514
3
216,000
232,221
16,221
5,821,735
4
216,000
232,869
16,869
5,838,604
5
216,000
233,544
17,544
5,856,148
6
216,000
234,246
18,246
5,874,394
~
~
~
~
~
~
~
~
~
~
~
~
~
~
~
38
216,000
280,008
64,008
7,064,202
39
216,000
282,568
66,568
7,130,770
40
216,000
285,230
69,230
7,200,000
Required: 1. What is the face amount of the bonds? 2. What is the initial selling price of the bonds? 3. What is the term to maturity in years? 4. Interest is determined by what approach? 5. What is the stated annual interest rate? 6. What is the effective annual interest rate? 7. What is the total cash interest paid over the term to maturity? 8. What is the total effective interest expense recorded over the term to maturity?
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