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Calculate the cash amount of the interest payments

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Reference no: EM132971309

Question - Lifetime Fitness wants to raise lots of capital. They decide to raise money via issuing a bond on January 1, 2020.

We know the following:

Face Value: $250,000

Contract (Coupon) Rate 6.5%

Effective Rate: 6%

Life: 5-Years

Semiannual Payments

Present Value of the Bond: 255,333.

1: Is this Bond issued at a Premium or a Discount?

Premium. 6.5% Coupon vs 6% effective market.

2: What is the Journal Entry Required when the Bond is First Issued? You can omit the description in the journal entry.

3: Calculate the CASH AMOUNT of the Interest Payments each time a payment is made and the INTEREST EXPENSE we would record each payment.

4: What is the carrying value of the bond on December 31, 2022? *Make sure to calculate the time period covered here!

Reference no: EM132971309

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