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2) On January 1, 2015, Piper Co. issued ten-year bonds with a
face value of $3,000,000 and a stated interest rate of 10%, payable
semiannually on June 30 and December 31. The bonds were sold to
yield 12%. Table values are:
Present value of 1 for 10 periods at 10%
.386
Present value of 1 for 10 periods at 12%
.322
Present value of 1 for 20 periods at 5%
.377
Present value of 1 for 20 periods at 6%
.312
Present value of annuity for 10 periods at 10%
6.145
Present value of annuity for 10 periods at 12%
5.650
Present value of annuity for 20 periods at 5%
12.462
Present value of annuity for 20 periods at 6%
11.470
3) Calculate the issue price of the bonds.
Issue price of bond
4) Without prejudice to your solution in part (a), assume that the
issue price was $2,652,000. Prepare the amortization table for 2015,
assuming that amortization is recorded on interest payment dates
using the effective-interest method.
5) Sisco Co. purchased a patent from Thornton Co. for $620,000
on July 1, 2012. Expenditures of $119,000 for successful litigation in
defense of the patent were paid on July 1, 2015. Sisco estimates that
the useful life of the patent will be 20 years from the date of
acquisition.
Prepare a computation of the carrying value of the patent at
December 31, 2015.
6) On August 31, Latty Co. partially refunded $443,000 of its
outstanding 10% note payable made one year ago to Dugan State
Bank by paying $443,000 plus $44,300 interest, having obtained the
$487,300 by using $134,220 cash and signing a new one-year
$388,000 note discounted at 9% by the bank.