Madman Fitness wants to raise lots of capital. They decide to raise money via issuing a bond on January 1, 2020. We know the following: Face Value: $250,000 Contract (Coupon) Rate 6.5% Effective Rate: 6% Life: 5-Years Semiannual Payments Present Value of the Bond: 255,333. Is this Bond issued at a Premium or a Discount? What is the Journal Entry Required when the Bond is First Issued? Calculate the CASH AMOUNT of the Interest Payments each time a payment is made and the INTEREST EXPENSE we would record each payment. What is the carrying value of the bond on December 31, 2022?
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:
Madman Fitness wants to raise lots of capital. They decide to raise money via issuing a bond on January 1, 2020. We know the following:
Face Value: $250,000
Contract (Coupon) Rate 6.5%
Effective Rate: 6%
Life: 5-Years
Semiannual Payments Present
Is this Bond issued at a Premium or a Discount?
What is the
Calculate the CASH AMOUNT of the Interest Payments each time a payment is made and the INTEREST EXPENSE we would record each payment.
What is the carrying value of the bond on December 31, 2022?
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