The company has issued a bond with a £20,000,000 par value. It has 4 year maturity with a coupon of 2% paid annually. The cost associated with issuing the bond is £95,000 and the market interest rate at the time of issue was 3.5%. The company’s reporting period is 1 January to 31 December. With regards to the bond in situation 2, assuming the company chooses the effective interest rate method and the bond is issued on 1 January 2019: Calculate the initial effect on the balance sheet of the issuance. Calculate the ending carrying value, interest expense and cash flow effect on the financial statement, for each of the following four years (ignore the costs associated with issuing the bond). Calculate the same figures if the company had accounted for this, bond using the straight line method (ignore the costs associated with issue).

The company has issued a bond with a £20,000,000 par value. It has 4 year maturity with a coupon of 2% paid annually. The cost associated with issuing the bond is £95,000 and the market interest rate at the time of issue was 3.5%. The company’s reporting period is 1 January to 31 December. With regards to the bond in situation 2, assuming the company chooses the effective interest rate method and the bond is issued on 1 January 2019: Calculate the initial effect on the balance sheet of the issuance. Calculate the ending carrying value, interest expense and cash flow effect on the financial statement, for each of the following four years (ignore the costs associated with issuing the bond). Calculate the same figures if the company had accounted for this, bond using the straight line method (ignore the costs associated with issue).

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

See similar textbooks

Similar questions

Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
The company has issued a bond with a £20,000,000 par value. It has 4 year maturity with a coupon of 2% paid annually. The cost associated with issuing the bond is £95,000 and the market interest rate at the time of issue was 3.5%. The company’s reporting period is 1January to 31 December. With regards to the bond in situation 2, assuming the company chooses the effective interest rate method and the bond is issued on 1 January 2019: If a different company had issued the same bond but had chosen to record the bond at fair value, what would be the ending carrying amount in the financial statements year ending 31 Dec 2021 if the market interest rate was 4.5%?
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 5 years. The bond certificate indicates that the stated coupon rate for this bond is 8.7% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.3%, then this bond will trade at
The sisyphean company has a bond outstanding with a face value of $1,000 that reaches maturity in 15 year. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi -annually. Required: assuming that this bond trades for $1,035.44, than the YTM for this bond is equal to:
The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $4,775.32, then the YTM for this bond is closest to OA. 9.1% B. 10.9% OC. 7.2% OD. 12.7%
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9.8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.2%, then the price that this bond trades for will be closest to: A. $1,387 B. $1,618 O C. $1,156 D. $925
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 5 years. The bond certificate indicates that the stated coupon rate for this bond is 10% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1,007.76, then the YTM for this bond is closest to O A. 7.9% B. 9.9% OC. 11.8% OD. 13.8% ... 4
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 11.8%, then the price that this bond trades for will be closest to: OA. $968 OB. $1,129 OC. $807 D. $645
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8.3% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 10.3%, then the price that this bond trades for will be closest to:
A company has issued 14%, 10 year bond that pays interest semiannually. If the market price of the bond to yield an effective annual rate 13%. What is the price the bond? Please show your calcilation in a handwritten format.
"A Company has a bond outstanding with a face value of $1000 that reaches maturity in 4 years. The bond certificate indicates that the stated coupon rate for this bond is 2.9% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the bond is 6%, then the price that this bond trades for will be closest to__________.
JMN Corporation issued bonds on January 1, 2006. The bonds have a coupon rate of 5.0%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2021 (15 years). What was the yield to maturity on January 1, 2006, if the market price of the bond on that date was $1000? O 4.5% O 5.0% O 5.25% O 5.5%.