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On January 1, 2018, Tennessee Harvester Corporation issued debenture bonds that pay interest semiannually on June...

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Accounting

On January 1, 2018, Tennessee Harvester Corporation issueddebenture bonds that pay interest semiannually on June 30 andDecember 31. Portions of the bond amortization schedule appearbelow:

PaymentCash
Payment		Effective
Interest		Increasein
Balance		Outstanding
Balance
5,774,920
1216,000230,99714,9975,789,917
2216,000231,59715,5975,805,514
3216,000232,22116,2215,821,735
4216,000232,86916,8695,838,604
5216,000233,54417,5445,856,148
6216,000234,24618,2465,874,394
~~~~~
~~~~~
~~~~~
38216,000280,00864,0087,064,202
39216,000282,56866,5687,130,770
40216,000285,23069,2307,200,000

Required:
1. What is the face amount of the bonds?
2. What is the initial selling price of thebonds?
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 interestrate?
7. What is the total cash interest paid over theterm to maturity?
8. What is the total effective interest expenserecorded over the term to maturity?

Answer & Explanation Solved by verified expert
3.6 Ratings (473 Votes)
Answer 1 Face Amount 7200000 Answer 2 Initial Selling Price 5774920 Answer 3 Number of semiannual coupons 40 Term to Maturity 20 years Answer 4 Effective interest is increasing by each payment so interest is    See Answer
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