solution

On July 1, 2015, ABC Co. issued 10-year, $4,574 million maturity
value, 3% coupon bonds when the
market rate was 2% for a cash price of $4,994 million. Interest was
payable semi-annually on Dec. 31
and June 30. ABC also issued $3,527 million face value, 20-year,
zero coupon bonds on July 1, 2017, that
mature June 30, 2037, for a cash price of $2,619 million. The
effective market interest rate at issuance
was 1.5%. ABC repurchased $1,143 million face value coupon bonds on
June 30, 2020, for $1,220 million
cash (after interest was paid) and $582 million in face value of
the zero- coupon bonds on June 30, 2021,
for a purchase price of $432 million cash.
Questions 1 through 6 use what you have learned about coupon bonds
as well as the explanation of
zero-coupon bonds on p. 537 of your text. You may research online
to help you answer question 7.
PLEASE PROVIDE CITATIONS IN YOUR ANSWER to questions 7 and 8.
Please answer in complete
sentences and show your calculations for numerical answers and
journal entries. (Round percentages to
two decimal places and dollars amounts should be in millions with
no decimals. We recommend using
the round function for this in excel. If using Excel to determine
your present values, please upload that
file in addition to any Word or PDF. Excel files are not the best
place to place written answers. If not
using excel, show all your work, including any PV factors with four
decimal places.

2. Prepare amortization schedules for both bond issuances
beginning with the issuance date. Note
interest is semi- annual for the coupon bonds and you may assume
annual for the zero- coupon
bonds. Be sure to include a column for the balance remaining in the
bond discount or premium
account as well as the book value. Use the effective interest
method.