On December 31, 2022, Parent Co. has a bond issueoutstanding that has a face value of $1,000,000, anunamortized premium of $50,000, a coupon rate of8%, and five yearsremaining to maturity. Non-affiliated investors hold allthe bonds. Market rates of interest have risen above thecoupon rate on the bonds and have caused the marketprice ofParent Co.'s bonds to fall.On December 31, 2022, Sub Co. purchases all of theoutstanding bonds of Parent Co. for $900,000.Using the approach consistent with the incomemeasurement of the separate entities, the gainallocated to Parent Co. and Sub Co. respectivelywould be?Multiple Choice$50,000: $100,000$0; $150,000$100,000; $50,000$150,000; $0

Answer :) To determine the gain allocated to Parent Co. and Sub Co. respectively from the bond…

Answered: On December 31, 2022, Parent Co. has a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On April 1, 2014, Fredriksen Corp. sold a $700 million bond issue to finance the purchase of a new distribution facility. These bonds were issued in $1,000 denominations with a maturity date of April 1, 2034. The bonds have a coupon rate of 8.00% with interest paid semiannually. Required: a) Determine the value today April 1, 2024 of one of these bonds to an investor who requires a 12 percent return on these bonds. Why is the value today different from the par value? b) Assume that the bonds are selling for $925.00. Determine the current yield and the yield-to-maturity. Explain what these terms mean. c) Explain what layers or textures of risk play a role in the determination of the required rate of return on Fredriksen's bonds.
The following information applies to the questions displayed below.] Serotta Corporation is planning to issue bonds with a face value of $300,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and does not use a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided.
Wildhorse Corp. has 18-year bonds outstanding. These bonds, which pay interest semiannually, have a coupon rate of 9.875 percent and a yield to maturity of 6.0 percent. Assume face value is $1,000. Problem 8.30(a) Your answer is incorrect. Compute the current price of these bonds. (Round answer to 2 decimal places, e.g. 15.25.) Current price $ EA
In December 2022, Pronghorn Corp. decided to issue 100,000 convertible bonds, maturing in December 2032. The bonds have a face value of $1,000 and promise an annual coupon payment of 6.00 percent. The conversion ratio of these bonds is 25.86, and it is known that Pronghorn Corp's common shares were trading at $35 in December 2022. These bonds are rated A-, and straight bonds from similar companies with similar maturity yield 9 percent. The current market price of these bonds is $1,066. Calculate the conversion price, conversion value, SBV, floor value, and conversion premium for these bonds. (Round answers to 2 decimal places, e.g. 125.25 or 25.25%.) Conversion price Conversion value $ SBV Floor value Conversion premium $ %
On January 1, 2022, Fancy Co issued $100,000 in 10 year bonds. The bonds have a stated rate of 5% but are issued at a discount as the market rate is 7%. Because the market rate is higher, Fancy receives the present value which is $92,640. The coupon is paid annually on December 31st of each year. Provide the journal entries for Jan 1, 2022, and Dec 31st, 2022.
Exam Corp. is in need of cash. On 1/1/2023 Exam Corp. issues bonds with a $350,000 face value. The bonds have an 7.50% coupon rate. The market rate is 18%. The bonds have a life of 6 years, and are compounded semiannually. At the time of issuance, the price of the bonds is correctly calculated to be $218,420. All answers below can be rounded to the nearest dollar. What is the journal entry Exam Corp. will record on 6/30/23? Dr. Interest Revenue $19,658 Cr. Cash $13,125 Cr. Discount $6,533 Dr. Interest Expense $19,658 Cr. Discount $6,592 Cr. Cash $26,250 Dr. Interest Payable $19,658 Cr. Premium $6,592 Cr. Cash $26,250 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Premium $6,533 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Discount $6,533
ART Vandelay Inc. has two different bonds currently outstanding. Bond A has a face value of $40,000 and matures in 20 years. The bond makes no payment for the first 6 years, pays $2000 semiannually for the subsequent eight years, and finally $2500 semiannually for the last 6 years. Bond B also has a value of $40,000 and matures in 20 years. However, it makes no coupon payments over the life of the bond. If the stated annual interest rate is 12%, compounded semiannually, a. What is the current price of Bond A? b. What is the current price of Bond B?
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.]

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