Forkman Company issued five-year, $25,000 bonds with a stated rate of interest of 8%, compounded semiannually.

Th

Calculate the issuance price of the bond (e.g., the total present value).

Effective Interest Rate / Annum 12%

Effective Interest Rate / Semi Annum 6%

Interest @
Periods Coupon Rate Principal Total Cashflows Discount Factor Present Value
1 - 1,000 - 1,000 0.9434 - 943.40
2 - 1,000 - 1,000 0.8900 - 890.00
3 - 1,000 - 1,000 0.8396 - 839.62
4 - 1,000 - 1,000 0.7921 - 792.09
5 - 1,000 - 1,000 0.7473 - 747.26
6 - 1,000 - 1,000 0.7050 - 704.96
7 - 1,000 - 1,000 0.6651 - 665.06
8 - 1,000 - 1,000 0.6274 - 627.41
9 - 1,000 - 1,000 0.5919 - 591.90
10 - 1,000 - 25,000 - 26,000 0.5584 - 14,518.26
7.36009 - 21,320

1 Semiannual interest payments

Principal 25,000
Interest Rate 8%
Interest / Annum 2,000
Interest / Semi Annum 1,000
Period 5 Years @ Semi-annual 10

2 Interest / Semi Annum 1,000

Present value of an annuity of 10 payments of $1 at 6% 7.3601 -
PV of interest payments 7,360 A

3 Maturity value of bonds 25,000

Present value of $1 received 10 periods in the future discounted at 6% 0.5584
Present value of principal amount 13,960 B

4 PV of the Bond 21,320 A + B

Discount on Bond 3,680

Kelpax Company issued seven-years, $100,000 bonds with a stated rate (coupon) of interest of 8%, compounded semian
6%.

Calculate the issuance price of the bond (e.g., the total present value).
 Kelpax Company issued seven-years, $100,000 bonds with a stated rate (coupon) of interest of 8%, compounded semian
6%.

Calculate the issuance price of the bond (e.g., the total present value).

Effective Interest Rate / Annum 6%

Effective Interest Rate / Semi Annum 3%

Periods Interest Principal Total Cashflows Discount Factor Present Value

1 - 4,000 - 4,000 0.9708738 - 3,883.50
2 - 4,000 - 4,000 0.9425959 - 3,770.38
3 - 4,000 - 4,000 0.9151417 - 3,660.57
4 - 4,000 - 4,000 0.8884870 - 3,553.95
5 - 4,000 - 4,000 0.8626088 - 3,450.44
6 - 4,000 - 4,000 0.8374843 - 3,349.94
7 - 4,000 - 4,000 0.8130915 - 3,252.37
8 - 4,000 - 4,000 0.7894092 - 3,157.64
9 - 4,000 - 4,000 0.7664167 - 3,065.67
10 - 4,000 - 4,000 0.7440939 - 2,976.38
11 - 4,000 - 4,000 0.7224213 - 2,889.69
12 - 4,000 - 4,000 0.7013799 - 2,805.52
13 - 4,000 - 4,000 0.6809513 - 2,723.81
14 - 4,000 - 100,000 - 104,000 0.6611178 - 68,756.25
11.296 - 111,296

1 Semiannual interest payments

Principal 100,000
Interest Rate 8% Annual 4%
Interest / Annum 8,000
Interest / Semi Annum 4,000 4,000
Periods @ 7 years 14

2 Semiannual interest payments 4,000

Present value of an annuity of 14 payments of $1 at 3% 11.2961 -
Present value of interest payments 45,184

3 Maturity value of bonds 100,000

Present value of $1 received 14 periods in the future discounted at 3% 0.661
Present value of principal amount 66,112

4 PV of the Bond 111,296

Premium on Bonds 11,296
ounded semiannually. The effective interest rate demanded by investors for bonds of this level of risk is 12%.

Amortized cost b/f Amortized cost c/f

Periods Cash flow (brought forward) Interest expense (carry forward)
0 21,320 - 21,320
1 - 1,000 - 21,320 - 1,279 - 21,599
2 - 1,000 - 21,599 - 1,296 - 21,895
3 - 1,000 - 21,895 - 1,314 - 22,209
4 - 1,000 - 22,209 - 1,333 - 22,541
5 - 1,000 - 22,541 - 1,352 - 22,894
6 - 1,000 - 22,894 - 1,374 - 23,267
7 - 1,000 - 23,267 - 1,396 - 23,663
8 - 1,000 - 23,663 - 1,420 - 24,083
9 - 1,000 - 24,083 - 1,445 - 24,528
10 - 26,000 - 24,528 - 1,472 -
6.00% EIR

1 Interest Expense 1,279

Bonds Payable 1,279

2 Bonds Payable 1,000

Cash 1,000

Formula
Proof 7.36009 (0.00)
Interest Expense 279
Bonds Payable
Future Value - This is what will the Co. pay after 5 years.

Today's value

Bonds Issued at a Discount

f 8%, compounded semiannually. The effective interest rate demanded by investors for bonds of this level of risk is
f 8%, compounded semiannually. The effective interest rate demanded by investors for bonds of this level of risk is

Year Cash flow Amortized cost b/f Interest expense

0 111,296
1 - 4,000 - 111,296 (3,338.88)
2 - 4,000 - 110,635 (3,319.05)
3 - 4,000 - 109,954 (3,298.62)
4 - 4,000 - 109,253 (3,277.58)
5 - 4,000 - 108,530 (3,255.91)
6 - 4,000 - 107,786 (3,233.58)
7 - 4,000 - 107,020 (3,210.59)
8 - 4,000 - 106,230 (3,186.91)
9 - 4,000 - 105,417 (3,162.52)
10 - 4,000 - 104,580 (3,137.39)
11 - 4,000 - 103,717 (3,111.51)
12 - 4,000 - 102,829 (3,084.86)
13 - 4,000 - 101,913 (3,057.40)
14 - 104,000 - 100,971 (3,029.13)
3%

1 Interest Expense 3,319

Bonds Payable 3,319

2 Bonds Payable 4,000

Cash 4,000

Bonds Payable 681

Proof 11.2961 -

Proof 0.661 -
risk is 12%. Table I - PV of 1 Period

Table 2 - PV of Ordinary Annuity

279

279

279

level of risk is
level of risk is

Amortized cost c/f

- 111,296
- 110,635 - 661.12
- 109,954
- 109,253
- 108,530
- 107,786
- 107,020
- 106,230
- 105,417
- 104,580
- 103,717
- 102,829
- 101,913
- 100,971
0

- 681

681
Chapter 5 Measurement - 5.4 Amortised cost measurement - Modification of contractual cash flows

5.4.3 When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or m
does not result in the derecognition of that financial asset in accordance with this Standard, an entity shall recalculate the gr
amount of the financial asset and shall recognise a modification gain or loss in profit or loss. The gross carrying amount of th
asset shall be recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at
asset’s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired fin
or, when applicable, the revised effective interest rate calculated in accordance with paragraph 6.5.10. Any costs or fees incu
carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
 44.110 The terms are substantially different if the discounted present value of the cash flows under the n
terms, including any fees paid (net of any fees received and discounted using the original effective intere
rate), is at least 10% different from the discounted present value of the remaining cash flows of the
original financial liability (the ‘10% test’).

h flows

fied and the renegotiation or modification

entity shall recalculate the gross carrying
he gross carrying amount of the financial
h flows that are discounted at the financial
r originated credit-impaired financial assets)
h 6.5.10. Any costs or fees incurred adjust the
the modified financial asset.
the modified financial asset.
e of the cash flows under the new
ng the original effective interest
maining cash flows of the