On August 1, 2022, Schumpeter Conglomerates sold $180,000,000 20-year bonds with a coupon rate of 8% paid semi-annually. The market rate for a security of similar risk and maturity is 7%. Schumpeter Conglomerates hired Ivanov's Finance Shack to issue the securities at a cost of 1.25% of the selling price of the security. Attached to each $125,000 bond are six detachable warrants allowing for the purchase of 50 shares of no-par common stock for $10 per share. Each warrant is estimated to have a market value of $22. Record journal entries for the issuance of the bond, the first two interest payments, and any required adjusting entries for the fiscal year ending December 31, 2022.

On August 1, 2022, Schumpeter Conglomerates sold $180,000,000 20-year bonds with a coupon rate of 8% paid semi-annually. The market rate for a security of similar risk and maturity is 7%. Schumpeter Conglomerates hired Ivanov's Finance Shack to issue the securities at a cost of 1.25% of the selling price of the security. Attached to each $125,000 bond are six detachable warrants allowing for the purchase of 50 shares of no-par common stock for $10 per share. Each warrant is estimated to have a market value of $22. Record journal entries for the issuance of the bond, the first two interest payments, and any required adjusting entries for the fiscal year ending December 31, 2022.

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

Neubert Enterprises recently issued $1,000 par value 15-year bonds with a5% coupon paid annually and warrants attached. These bonds are currentlytrading for $1,000. Neubert also has outstanding $1,000 par value 15-yearstraight debt with a 7% coupon paid annually, also trading for $1,000.What is the implied value of the warrants attached to each bond?
The company expects to invest approximately $1 million in three months in corporate bonds. The current rate of interest is 5.10%. To hedge the position, the company wishes to use 3 year Treasury bond futures contracts trading at 9800. Calculate the profit or loss from the position in futures market if in 3 months the contracts are trading at 91.900. a. $168334.11 O b. $-16833.41 c. $-170862.48 O d. $392716.91 O e. $-1708624.84
Five years ago Tosev Inc. issued 30-year, $1,000 par value, semi-annual coupon bonds with a coupon rate of 9.10 percent. The bonds originally sold at a price of $1,010.32 per bond. Currently, those bonds have a market price of $1,118.15 per bond. The Chief Financial Officer of Tosev is currently considering issuing new bonds. These bonds will have a par value of $1,000, semi-annual coupon payments, a term of 25 years and a coupon rate of 8 percent. Due to differences in the legal provisions of the bonds, the Chief Financial Officer estimates that the yield to maturity on the new bonds will be one percent higher than the current yield to maturity on the old bonds. Based on the Chief Financial Officer's estimate, what would be the price per bond of the new bonds today? $1,000.00 $896.67 None of the answers in this list is within $0.25 of the correct answer. $1,118.15 $817.44 $901.19 10 fs % f6 hp f7 8
AYE Technologies issued 10-year bonds yesterday at their par value of RM1,000. These bonds pay RM60 in interest every six months, and their price has remained at the RM1,000 issue price. AYE's CFO has determined that the firm needs an additional RM2,000,000, and has decided to issue 10- year, RM1,000 par value bonds that pay only RM40 in interest every six months. If both bonds are to provide investors with the same yield, how many new bonds must AYE issue to raise RM2,000,000? (Ignore the day or two difference between the bonds' issue dates and any bond flotation costs.)
You are engaged by a CPA firm to help audit the financial statements of one of its clients, GTE Corporation. GTE is the holder of a bond issued by AT&T, which will mature in 12 years, with a par value of $1,000, and an annual coupon rate of 8%. If the market prevailing interest rate is 9% on the bonds in the same category, the CPA firm asks you to help estimate the value or price of the bond.
The MZ Mortgage Company is issuing a CMO with three tranches. The A tranche will consist of $40.5 million with a coupon of 8.25 percent. The B tranche will be issued with a coupon of 9.0 percent and a principal of $22.5 million. The Z tranche will carry a coupon of 10.0 percent with a principal of $45 million. The mortgages backing the security issue were originated at a fixed rate of 10 percent with a maturity of 10 years (annual payments). The issue will be overcollateralized by $4.5 million, and the issuer will receive all net cash flows after priority payments are made to each class of securities. Priority payments will be made to the class A tranche and will include the promised coupon, all amortization from the mortgage pool, and interest that will be accrued to the Z class until the principal of $40.5 million due to the A tranche is repaid. The B class securities will receive interest-only payments until the A-class is repaid and then will receive priority payments of…
Pamsole, Inc. has issued a bond with 40 warrants attached. The bonds have a 15-year maturity and an annual coupon of 10%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 14%. What is the implied value of each warrant?
Muscat Co. has an issue of OMR1,000 par value bonds with a 9% stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11 % the firm's bond will sell for ________ today.
On February 9, 2015, Hunter-Gratzner, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $42. We will assume that the 2022 coupon has just been redeemed. Initially (in 2015), the bond was sold at the premium price of $1,037. On February 9, 2022, this bond was selling for $972. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 1.75% on February 9, 2015, which reflected market expectations about future rates of inflation. The market rate of interest for a riskless corporate bond, of this maturity (i.e., a U.S. Treasury security), was 2.05% on February 9, 2022, which reflects market expectations about future rates of inflation. Question: What was the yield to maturity for this bond on February 9, 2015? [To 2 decimal places.]