Reference no: EM131824392

Accounting for Bonds using Amortized Cost Measurement Based on the Historical Market Interest Rate

O'Brien Corporation issues $8,000,000 face value, 8% semiannual coupon bonds maturing in 20 years. The market initially prices these bonds to yield 10% compounded semiannually. O'Brien Corporation accounts for these bonds using amortized cost measurement based on the historical market interest rate.

See the Present and Future Value Tables from the Appendix for help in solving this item. Round your final answers to the nearest dollar.

a.) The issue price of these bonds is $6,627,309

b.) The interest expense on these bonds for the first six months is $331,365

c.) The interest expense on these bonds for the second six months is $331,934

d.) The carrying value at the end of the second six-month period is $6,650,608

e.) Use present value computations to verify the carrying value of the bonds at the end of the second six-month period as computed in part d.