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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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
5. Grohl Co. issued 8-year bonds a year ago at a coupon rate of 11 percent. The bonds make semiannual payments. If the YTM on these bonds is 11 percent, what is the current bond price? a) $1,531.43 b) $1,010.00 c) $718.96 d) $1,005.00 e) $1,000.00
On 1 July 2023 Tamasek Ltd issues convertible notes with a face value of $10 million. The convertible notes have a 20-year term and mature on 30 June 2043. Interest is payable semi-annually in arrears, i.e. on 31 December and 30 June each year, and the coupon rate of interest is 7.5% p.a., At around the same point in time, companies with a similar credit rating issue debt securities without a conversion option with a coupon rate of 10% p.a., payable semi-annually. Required: Determine the debt and equity components of the convertible notes issued using the residual valuation method. Prepare the entries of Tamasek Ltd to account for the convertible notes over the period 1 July 2023 to 30 June 2025.
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.)
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
On May 1, 2021, Bo Smith, proud father of newborn son Bobo, purchased $200,000 in zero-coupon bonds that mature on May 1, 2041. The bonds pay no interest during the period of time they are outstanding. The interest rate for such borrowings is at 9%. Interest compounds annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:Calculate the price Bo paid for the bonds.
Dufner Co. issued 13-year bonds one year ago at a coupon rate of 7 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.3 percent, what is the current dollar price assuming a par value of $1,000? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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?
9) The Federal Motors Company has a $1,000 par value bond outstanding that pays 8(1)/(2) percent annual interest. The current yield to maturity on such bonds in the market is 10 percent. Compute the price of the bonds for these maturity dates: a) 25 years. b) 10 years. must be written out and not solved in excel
3.

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