Tyson Construction Inc.
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.
On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.
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Refer to the information provided for Tyson Construction Inc. What is the carrying value of the bonds after the first interest payment is made on June 30, 2012?

Question

Tyson Construction Inc. 
Use the information provided for Tyson Construction Inc. to answer the following question(s) using the effective interest method.
On January 2, 2012, Tyson Construction Inc. issued $1,000,000, 10-year bonds for $1,135,915. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%.
-
Refer to the information provided for Tyson Construction Inc. What is the carrying value of the bonds after the first interest payment is made on June 30, 2012?

Quizplus · Accepted Answer

The carrying value of the bonds after the first interest payment is made on June 30, 2012, is $1,131,351.60. This is calculated by taking the present value of the remaining cash flows using the effective interest rate. The effective interest rate is 8%, which is the market rate at the time the bonds were issued. The remaining cash flows are the interest payments that will be made over the life of the bonds and the principal payment that will be made at maturity.