On January 1, 2019, Company C issues $200,000 of its 6% bonds which mature in 10 years. Interest is paid annually on December 31. The market (effective) rate of interest is 4%. If the bond sells as 88.2, what is the discount or premium (hint: determine the price of the bond first)?

On January 1, 2019, Company C issues $200,000 of its 6% bonds which mature in 10 years. Interest is paid annually on December 31. The market (effective) rate of interest is 4%. If the bond sells as 88.2, what is the discount or premium (hint: determine the price of the bond first)?

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

On September 30, 2024, the Techno Corporation issued 8% stated rate bonds with a face amount of $500 million. The bonds mature on September 30, 2044 (20 years). The market rate of interest for similar bonds was 10%. Interest is paid semiannually on March 31 and September 30. Required: Determine the price of the bonds on September 30, 2024. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount, not in millions. (FV of $1. PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) Time values are based on: Cash Flow Interest Principal Price of bonds Amount Present Value
The Werner Company issued 10-year bonds on January 1, 2020. The debt has a face value of $800,000 and an annual stated interest rate of 6%. Interest payments are due semiannually beginning June 30, 2020. The market interest rate on the bonds is 6%. a.What will this bond be priced at on January 1, 2020? b.More advanced: On January 1, 2023, the market rate of interest for these bonds is 8%. What will you be willing to pay for these bonds on that date?
On January 1, 2022, Johnson Company issues $100,000 face amount bonds. Thesebonds pay 7% APR interest. Interest is paid semiannually on June 30th andDecember 31st. The bonds mature in 10 years.On January 1, 2022, the market rate for similar bonds was 8% and thereforethe bonds were sold with a $6,795 discount.Johnson Company uses the effective interest method to calculate interest expense. REQUIRED: Prepare the following entries for Johnson Company.1-1 Prepare the January 1, 2022 journal entry record the bond issue.1-2 Prepare the June 30, 2022 journal entry to record the interest payment.1-3 Prepare the June 30, 2023 journal entry to record the interest payment.
A company issues 8%, two-year bonds on December 31, 2018, with a par value of $10,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 96.0% or $9,600. (a) Prepare an amortization table for these bonds; use the straight-line method to amortize the discount. Then prepare journal entries to record; (b) The issuance of bonds on December 31, 2018; (c) The first interest payments on each June 30 and December 31; and (d) The maturity of the bond on December 31, 2020.
Stanford issues bonds dated January 1, 2021, with a par value of $244,000. The bonds' annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $232,011. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an effective interest amortization table for these bonds. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare an effective interest amortization table for these bonds. Note: Round all amounts to the nearest whole dollar. Semiannual Interest Period-End 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 Total Cash Interest Bond Interest Paid Expense Discount Amortization Unamortized Discount Carrying Value
Quatro issues bonds dated January 1, 2021, with a par value of $900,000. The bonds' annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and there was bonds Issuance costs of $29, 850 1. What is the price of these bonds at issuance? 2. Prepare the journal entries to record how much total bond interest expense will be recognized over the life of these bonds and the Bond issuance costs 3 Prepare an amortization table for these bonds using the effective interest method.
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (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.): January 1, 2021 11.0 % June 30, 2021 12.0 % Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate…
Temptation Vacations issues $60 million in bonds on January 1, 2021, that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below:Required:1. Were the bonds issued at face amount, a discount, or a premium?2. What is the original issue price of the bonds?3. What is the face amount of the bonds?4. What is the stated annual interest rate?5. What is the market annual interest rate?6. What is the total cash paid for interest assuming the bonds mature in 20 years?
The bonds mature on December 31, 2033 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2024. 2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2024, interest on June 30, 2024 (at the effective rate) and interest on December 31, 2024 (at the effective rate). Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Determine the price of the bonds at January 1, 2024. Note: Enter your answer in whole dollars. Price of bonds
On June 30, 2024, Single Computers issued 5% stated rate bonds with a face amount of $280 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 4% (2.0% semiannual rate). Interest is paid semiannually (2.5%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024. 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method.
On June 30, 2024, Single Computers issued 6% stated rate bonds with a face amount of $200 million. The bonds mature on June 30, 2039 (15 years). The market rate of interest for similar bond issues was 5% (2.5% semiannual rate). Interest is paid semiannually (3%) on June 30 and December 31, beginning on December 31, 2024. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Determine the price of the bonds on June 30, 2024. 2. Calculate the interest expense Single reports in 2024 for these bonds using the effective interest method.
Stanford issues bonds dated January 1, 2019, with a par value of $500,000. The bonds’ annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $463,140. 1. What is the amount of the discount on these bonds at issuance? 2. How much total bond interest expense will be recognized over the life of these bonds? 3. Prepare an effective interest amortization