On June 30, 2021, Singleton Computers issued 7% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2036 (15 years). The market rate of interest for similar bond issues was 6% (3.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on December 31, 2021.
Required:
a. Determine the price of the bonds on June 30, 2021.
b. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method.
