On January 1, 2017 Pioneer Co. issued $550,000 of 5 year 12% bonds for $592,468 yielding...

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Accounting

On January 1, 2017 Pioneer Co. issued $550,000 of 5 year 12%bonds for $592,468 yielding a market rate of 10%. Interest ispayable semiannually on June 30 and December 31.
a) Confirm the bond issuance price and show your work.
b) Why are two different present value tables used to price thebond?
c) Is this bond issuing at a discount, premium or par? Explainyour answer.
d) Create your own amortization table. The table should show thecarrying value at January 1 as the first row. Include 2 full yearsof interest payments. Refer to the videos and text for amortizationtable examples.
e) Record the following entries on the included FinancialStatement Impact Template. a. Jan 1, 2017 bond issuance b. June 30,2017 interest payment c. Dec 31, 2017 interest payment
f) This company chose to issue a bond as means to raise capital.Identify two reasons a company may choose this type offinancing.

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4.2 Ratings (484 Votes)

a Coupon Payment 550000 12 2 33000 In the last period ie 10 we will get Coupon interest Principal value Annual Discount Rate is 10 so the semi annual discount rate is 5 Hence we have taken discounting factor as 5 Period Amount Disc Fac 5 Present Value 1 33000 See Answer

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