accounting 461138

On January 1, 2011, Piper Co. issued ten-year bonds with a face value of $1,000,000 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 annunity for 10 periods at 10%………………. 6.145

Present value of annunity for 10 periods at 12%………………. 5.650

Present value of annunity for 20 periods at 5%……………….. 12.462

Present value of annunity for 20 periods at 6%……………….. 11.470

(a) Calculate the issue price of the bonds.

(b) Without prejudice to your solution in part (a), assume that the issue price was $884,000. Prepare the amortization table for 2011, assuming that amortization is recorded on interest payment dates.