On January 1, 2014, Tonika Corporation issued a seven-year, $10,000, 7% bond. The interest is payable annually each December 31. The issue price was $9,479 based on an 8% effective interest rate. Assuming effective-interest amortization is used, the 2015 interest expense is closest to:
a. $668.
b. $763.
c. $664.
d. $700.
On January 1, 2014, a corporation issued $400,400 of 10-year, 12% bonds. The interest is payable semi-annually on June 30 and December 31. The issue price was $413,953 based on a 10% effective (market) interest rate. Assuming the effective-interest method of amortization is used, what is the book value of the bond liability as of June 30, 2014 (to the nearest dollar)?
a. $417,279.
b. $403,726.
c. $400,400.
d. $410,627.
On January 1, 2014, Broker Corp. issued $2,400,000 par value 11%, 11 year bonds which pay interest each December 31. If the market rate of interest was 13%, what was the issue price of the bonds? (The present value factor for $1 in 11 periods at 11% is 0.3173 and at 13% is 0.2607. The present value of an annuity of $1 factor for 11 periods at 11% is 6.2065 and at 13% is 5.6869.)
a. $2,262,832.
b. $2,400,000.
c. $2,127,022.
d. $2,697,913.