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What was the issue price on January

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Problem - PowerTap Utilities is planning to issue bonds with a face value of $2,000,000 and a coupon rate of 10 percent. The bonds mature in 8 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. PowerTap uses the effective-interest amortization method. Assume an annual market rate of interest of 12 percent.

Required -

1. What was the issue price on January 1 of this year?

2. What amount of interest expense should be recorded on June 30 and December 31 of this year?

3. What amount of cash should be paid to investors June 30 and December 31 of this year?

4. What is the book value of the bonds on June 30 and December 31 of this year?

Reference no: EM132462713

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