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UML Inc. issued 9% bonds on January 1, 2021. The bonds have a maturity date of December 31, 2024 and a face value of $500,000. UML Inc. issued the bonds for $483,842. For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31, beginning June 30, 2021. What is the outstanding balance (book value) of the bonds as of December 31, 2021

Sagot :

Answer:

The outstanding balance (book value) of the bonds as of December 31, 2021 is $480,542.41.

Explanation:

Note: See the attached excel file for the amortization schedule used in calculating the outstanding balance (book value) of the bonds as of December 31, 2021 (in bold red color).

From the attached amortization schedule, we have:

December 31, 2021 Closing book balance = December 31, 2021 Beginning book balance - December 31, 2021 Discount Amortized = $480,542.41

Therefore, the outstanding balance (book value) of the bonds as of December 31, 2021 is $480,542.41.

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