Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $70,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following . The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. =4,900,000 X The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X 1. The amount of the bond interest expense for the first year. Round to the nearest dollar. 4,900,000 X Feedback Check My Work Remember, the selling price of a bond is the sum of the present values of: the face amount of the bonds due at the maturity date and the periodic interest to be paid on the bonds. The market rate of interest used to compute the present value of both the face amount and the periodic interest. As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period.
Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $70,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following . The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. =4,900,000 X The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X 1. The amount of the bond interest expense for the first year. Round to the nearest dollar. 4,900,000 X Feedback Check My Work Remember, the selling price of a bond is the sum of the present values of: the face amount of the bonds due at the maturity date and the periodic interest to be paid on the bonds. The market rate of interest used to compute the present value of both the face amount and the periodic interest. As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense
Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $70,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following:
a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar.
4,900,000 X
b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar.
4,900,000
The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar.
4,900,000 X
d. The amount of the bond interest expense for the first year. Round to the nearest dollar.
4,900,000 X
Feedback
Check My Work
Remember, the selling price of a bond is the sum of the present values of: the face amount of the bonds due at the maturity date and the periodic interest to be paid on the bonds.
The market rate of interest is used to compute the present value of both the face amount and the periodic interest.
As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education