On the first day of its fiscal year, Jacinto Company issued $14,700,000 of five-year, 8% bonds to finance its operations of producing and sellinghome improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting inJacinto Company receiving cash of $14,118,450.a. Journalize the entries to record the following:1. Issuance of the bonds.2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.Cash1.14,118,450Discount on Bonds Payable581,550Bonds Payable14,700,0002.Interest Expense529,845Discount on Bonds Payable v581,155Cash V588,000Interest Expense3.529,845Discount on Bonds Payable58,155Cash588,000 b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar.c. Why was the company able to issue the bonds for only $14,118,450 rather than for the face amount of $14,700,000?The market rate of interest is greater than vthe contract rate of interest.

Bond A bond is a type of loan provided by the investor to the company or Government. Investors are…

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. c. Why was the company able to issue the bonds for only $14,118,450 rather than for the face amount of $14,700,000? The market rate of interest is greater than the contract rate of interest.

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. c. Why was the company able to issue the bonds for only $14,118,450 rather than for the face amount of $14,700,000? The market rate of interest is greater than the contract rate of interest.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

At the beginning of the year, Marshall Square, Inc. issued TA 2, 3 $100 million (maturity value) of 20-year debentures. The debentures carry a 4.75 percent annual coupon rate (compounded semi-annually) and interest payments are made semi-annually. The market rate of interest at the time the debentures were issued was 5 percent. Calculate the gain or loss on retirement. What is the impact on bonds payable, bond discount and cash?
Solsberry has sold a twenty-year serial bond issue with a face value of $15 million. The average maturity of the issue is fifteen years. Total interest to be paid on the bonds, payable semi-annually, equals S12,375 thousand. What is the net interest cost (NIC) of the issue? A. 4.125% B. 5.5% C. The NIC cannot be computed from the data provided here. D. 8.25%
Can you help me with this problem with step by step explanation, please? Thank you :)
If a company issues $100,000 Face Value, 10 year bonds with a contractural interest rate of 6%, which of the following situations could occur?a. Bonds will be sold at a premium when the market rate of interest is 7%b. Bonds will be sold at a discount when market rate is of interest 7%c. Bonds will be sold at face value when market rate of interest is 7%d. The issue of bonds cannot be sold when market rate is 7%
Northern Airlines issued 25-year bonds with a maturity value of $3 million. Which statement is true if the bonds were issued at a premium? Select one: a. The effective or yield rate of interest was greater than the maturity value of the bonds. b. The cash rate of interest exceeded the coupon rate. c. The effective or yield rate of interest was less than the coupon rate. d. The effective or yield rate of interest exceeded the coupon rate. Save AnswersNext
1. Alpha Co. is planning to issue bonds semiannuallywith a coupon rate of 8%, issued and 30 years to maturity. Assume the nominal interest rate on bonds is 7%. The par value of $1,000. What is the value of the coupon for the bondholder will receive? 2. A lessee and lessor face the same tax rate interest rate. Also, there are no transaction costs. The net advantage to leasing for the lessor is $450. Under these conditions, what is the net advantage to leasing be for the lessee under this proposed lease payment? (I answered $450 but it was wrong)
Please provide whole answer: A company has a bond outstanding. Bond A has a face value of $20,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $900 every six months over the subsequent eight years, and finally pays $1,300 every six months over the last six years. If the required return on this bond is 5.4% compounded semiannually, what is the current price of Bond A? What would be the price if the bond was compounded quarterly?
Bonds pay the face value to the investor when they are a. held over 10 years. b. held 20 years. c. held until maturity. d. sold on the market before maturity.
A company issues a bond with a par value of $500,000 and a contract rate of 5%. Explain the concept of market rate. Why would a company issue a bond at a discount or a premium? How is bond price impacted? If the bond is issued at a discount or a premium, does it impact the interest or principal paid? Why or why not? (Answer in 5-10 sentences)
A bond of Visador Corporation pays $70 in annual interest, with a $1,000 par value. The bonds mature in 16 years. The market's required yield to maturity on a comparable-risk bond is 8.5 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 5 percent? c. Interpret your finding in parts a and b.
2. Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. An investor would be willing to pay an amount ? the face value for this bond. A. More than B. Less than C. Equal to The bonds were issued at? A. Par B. A premium C. A discount
You are considering an investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 1.50 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: Real risk-free rate = 0.50% Default risk premium = 1.40% Liquidity risk premium = 1.00% Maturity risk premium = 2.00% a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 30-year bonds? Note: Round your percentage answers to 2 decimal places (ie., 0.1234 should be entered as 12.34). Expected inflation premium Fair interest rate