Tamarisk Inc. is building a new hockey arena at a cost of $2,250,000. It received a down payment of $450,000 from local businesses to support the project, and now needs to borrow $1,800,000 to complete the project. It therefore decides to issue $1,800,000 of 10-year, 10.5% bonds, These bonds were issued on January 1, 2020, and pay interest annually on each January 1. The bonds yield 10% to the investor and have an effective interest rate to the issuer of 10.4053%. (There is an increased effective interest rate due to the capitalization of the bond issue costs.) Any additional funds that are needed to complete the project will be obtained from local businesses. Tamarisk Inc. paid and capitalized $45,000 in bond issuance costs related to the bond issue, Tamarisk prepares financial statements in accordance with IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the bonds and prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Hint: Refer to Chapter 3 for tips on calculating. For the journal entry, use the amount arrived at using the time value of money tables.) (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Tamarisk Inc. is building a new hockey arena at a cost of $2,250,000. It received a down payment of $450,000 from local businesses to support the project, and now needs to borrow $1,800,000 to complete the project. It therefore decides to issue $1,800,000 of 10-year, 10.5% bonds, These bonds were issued on January 1, 2020, and pay interest annually on each January 1. The bonds yield 10% to the investor and have an effective interest rate to the issuer of 10.4053%. (There is an increased effective interest rate due to the capitalization of the bond issue costs.) Any additional funds that are needed to complete the project will be obtained from local businesses. Tamarisk Inc. paid and capitalized $45,000 in bond issuance costs related to the bond issue, Tamarisk prepares financial statements in accordance with IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the bonds and prepare the journal entry to record the issuance of the bonds on January 1, 2020. (Hint: Refer to Chapter 3 for tips on calculating. For the journal entry, use the amount arrived at using the time value of money tables.) (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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Transcribed Image Text:Question 2
Tamarisk Inc. is building a new hockey arena at a cost of $2.250.000. It received a down payment of $450.000 from local businesses to support the project, and now needs to borrow
$1,800,000 to complete the project. It therefore decides to issue $1,800,000 of 10-vear, 10.5% bonds, These bonds were issued on January 1, 2020, and pay interest annually on each
January 1. The bonds yield 10% to the investor and have an effective interest rate to the issuer of 10.4053%. (There is an increased effective interest rate due to the capitalization of
the bond issue costs.) Any additional funds that are needed to complete the project will be obtained from local businesses. Tamarisk Inc. paid and capitalized $45,000 in bond issuance
costs related to the bond issue. Tamarisk prepares financial statements in accordance with IFRS.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
dy
Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the bonds and prepare the journal entry to record the issuance of the bonds on January
1, 2020. (Hint: Refer to Chapter 3 for tips on calculating. For the journal entry, use the amount arrived at using the time value of money tables.) (For calculation purposes, use 5
decimal places as displayed in the factor table provided and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the
amount is entered. Do not indent manually. If no entry is reguired, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Jan, 1, 2020
EHOULLTET OF ACCOUNTE
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