On January 1, 2021, Sheridan Co. issued ten-year bonds with a face value of $4,500,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% 0.386 Present value of 1 for 10 periods at 12% 0.322 Present value of 1 for 20 periods at 5% 0.377 Present value of 1 for 20 periods at 6% 0.312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Issue price of bond
On January 1, 2021, Sheridan Co. issued ten-year bonds with a face value of $4,500,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are: Present value of 1 for 10 periods at 10% 0.386 Present value of 1 for 10 periods at 12% 0.322 Present value of 1 for 20 periods at 5% 0.377 Present value of 1 for 20 periods at 6% 0.312 Present value of annuity for 10 periods at 10% 6.145 Present value of annuity for 10 periods at 12% 5.650 Present value of annuity for 20 periods at 5% 12.462 Present value of annuity for 20 periods at 6% 11.470 Issue price of bond
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2021, Sheridan Co. issued ten-year bonds with a face value of $4,500,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
| Present value of 1 for 10 periods at 10% | 0.386 | ||
| Present value of 1 for 10 periods at 12% | 0.322 | ||
| Present value of 1 for 20 periods at 5% | 0.377 | ||
| Present value of 1 for 20 periods at 6% | 0.312 | ||
| Present value of annuity for 10 periods at 10% | 6.145 | ||
| Present value of annuity for 10 periods at 12% | 5.650 | ||
| Present value of annuity for 20 periods at 5% | 12.462 | ||
| Present value of annuity for 20 periods at 6% | 11.470 |
| Issue price of bond |
Expert Solution
Step 1
Bonds are instrument issued by company acknowledging the debt raised by company . It is a liability to be paid after certain period of time with interest.
10% bonds payable means that interest is payable at the rate of 10% per annum.
Since , interest is paid on semi annual basis , so the interest paid to bond holder on semi annual basis will be :-
Interest = 45,00,000 * 10% * 6/12 = 225,000
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education