Bond Premium and Discount Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $1,000. Required: 1. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30. $fill in the blank c8bef3083f9e067_1 2. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10. $fill in the blank c8bef3083f9e067_2 3. Calculate how much Markway is able to borrow if each bond is sold at 92% of par. $fill in the blank c8bef3083f9e067_3
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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Bond Premium and Discount
Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $1,000.
Required:
1. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30.
$fill in the blank c8bef3083f9e067_12. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10.
$fill in the blank c8bef3083f9e067_23. Calculate how much Markway is able to borrow if each bond is sold at 92% of par.
$fill in the blank c8bef3083f9e067_34. Calculate how much Markway is able to borrow if each bond is sold at 103% of par.
$fill in the blank c8bef3083f9e067_4Feedback1 & 2. Calculate the issue price for each bond then consider the total number of bonds to calculate total proceeds.
3 & 4. The par value is the same as face value.
5. Assume that the bonds are sold for $975 each. Prepare the entry to recognize the sale of the 750 bonds. If an amount box does not require an entry, leave it blank.
Cash Cash Discount on Bonds Payable Discount on Bonds Payable Bonds Payable Bonds Payable Record issuance of bonds at discount Feedback5. When bonds are issued, any premium or discount is recorded in a separate valuation account.
6. Assume that the bonds are sold for $1,015 each. Prepare the entry to recognize the sale of the 750 bonds. If an amount box does not require an entry, leave it blank.
Cash Cash Premium on Bonds Payable Premium on Bonds Payable Bonds Payable Bonds Payable Record issuance of bonds at premium
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