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###### Business · Accounting
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On January 1, 2014, Aumont Company sold 12% bonds having a maturity value of $500,000. The market determined that 10% was the appropriate rate of interest, given the risks that Aumont Company presents to bondholders. The bonds are dated January 1, 2014, mature January 1, 2019, and pay interest on December 31 of each year. 1. Determine the amount that bondholders will pay Aumont for these bonds when the bonds are issued on January 1, 2014. Present value of the maturity value = 500,000 x [PVSS, n = 5, i = 10%] = 500,000 x .62092 = 310,460 Present value of interest payments = (500,000 x .12) x [PVOA factor, n = 5, i = 10%] = 60,000 x 3.79079 = 227,447 Price of the bond = total present value of the future cash flows = 310,460 + 227,447 =$537,907

1. Complete the following amortization table for the first two interest payments.
 Date Cash Interest Effective Interest Premium Amortization Carrying Amount 1/1/14 537,907 12/31/14 12/31/15
1. Complete the following financial statements for 2014.
 Aumont Company Statement of Cash Flows For the Year Ended December 31, 2014 Operating Activities: Interest Payments Financing Activities: Cash proceeds from issuing bonds
 Aumont Company Income Statement For the Year Ended December 31, 2014 Other expenses: Interest Expense
 Aumont Company Balance Sheet December 31, 2014 Assets: Liabilities: Cash Bonds Payable Premium Equities: Retained Earnings
1. Complete the following financial statements for 2015.
 Aumont Company Statement of Cash Flows For the Year Ended December 31, 2015 Operating Activities: Interest Payments
 Aumont Company Income Statement For the Year Ended December 31, 2015 Other expenses: Interest Expense
 Aumont Company Balance Sheet December 31, 2015 Assets: Liabilities: Cash Bonds Payable Premium Equities: Retained Earnings
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