From page 9-5 of the VLN, when the interest is paid for the fifth interest payment, how much will the company record for interest expense? Effective Interest Amortization (Note: this differs from the book)The purpose of the effective iInterest amortization is to get rid of the differencebetween the bond payable and the bond liability.Affects Income statementAffects Cash FlowAffects Liabilities on BSBond Interest ExpenseBond Interest PaidAmortization AmountCarrying value atBeginning ofPeriodMarket rateFace valueStatedx at issuance(EffectiveInterest Rate)of bondInterestAmortization Amount%3DUse the amortization schedule below to record the first interest payment on June 30, 20XANote: this differs from the bookDetermining the bond carrying value at the end of the period:Interest expense - interest payment = amount amortized + Bond carrying value at the beginning ofthe period Bond carrying value at the end of the interest payment period.Dateİnterest expense @.04 (1/2 market)Interest payment @05 (1/2 stated)AmortizationCarrying Value at end1/1/XA6/30/XA$1,081.1112/31/XA6/30/XBBond Liability (Carrying Value)Premium$1,081(8%)XXXXXXBLXXXXXXNAXXXD BXXXXXxXXXXXXXXX$1,000110@MaturityInterest payment periods, every 6 months XYZ Corporation wants to issue ten-year $1,000 bonds 6% stated rate paying interest annually.Market rate of interest is 6%. What is the bond issue price on January 1, 20XA?Cash flows provided by the bond ($1,000 face, 6% annual interest)$1000$60$60$60$60$60$60$60$60$60$60345.8.9.10Calculate the issue price of the bondCASH FLOW X PV FACTOR (use market rate) =Present ValuePresent Value of Principal (Face)Present Value of Interest Payment(Face x stated)Issue price (sales price)OR with BAII Plus CalculatorPMTCPT PVFVThe issue price:$4NIRecord the bond issuance on January 1, 20XA:DateInterest expense @Interest payment eAmortizationCarrying Value at end06061/1/XA12/31/XA$1,000.00Record the interest payment on December 31, 20XA:Bond Liability (Carrying Value)Face (6%)$1,000$1000XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX14.6.10OMaturityInterest payment periods, once per yearInterest expense for the FIFTH interest payment:Bond liability after the FIFTH interest payment:

Bonds represents the obligation of the company arose by borrowing financial help from the public by…

XYZ Corporation wants to issue ten-year $1,000 bonds 6% stated rate paying interest annually. Market rate of interest is 6%. What is the bond issue price on January 1, 20XA? Cash flows provided by the bond ($1,000 face, 6% annual interest) $1000 $60 $60 $60 $60 $60 $60 $60 $60 $60 $60 1 4 7 8 9 10 Calculate the issue price of the bond CASH FLOW X PV FACTOR (use market rate) = Present Value Present Value of Principal (Face) Present Value of Interest Payment (Face x stated) Issue price (sales price) OR with BAII Plus Calculator PMT CPT PV IY FV The issue price: Record the bond issuance on January 1, 20XA: Date Interest expense @ Interest payment e Amortization Carrying Value at end .06 .06 1/1/XA 12/31/XA $1,000.00 Record the interest payment on December 31, 20XA: Bond Liability (Carrying Value) Face (6%) $1,000 XXX XXX 9. $1000 XXX XXX XXX XXX XXX XXX XXX XXX 1 3. 4. 10 OMaturity Interest payment periods, once per year Interest expense for the FIFTH interest payment: Bond liability after the FIFTH interest payment:

XYZ Corporation wants to issue ten-year $1,000 bonds 6% stated rate paying interest annually. Market rate of interest is 6%. What is the bond issue price on January 1, 20XA? Cash flows provided by the bond ($1,000 face, 6% annual interest) $1000 $60 $60 $60 $60 $60 $60 $60 $60 $60 $60 1 4 7 8 9 10 Calculate the issue price of the bond CASH FLOW X PV FACTOR (use market rate) = Present Value Present Value of Principal (Face) Present Value of Interest Payment (Face x stated) Issue price (sales price) OR with BAII Plus Calculator PMT CPT PV IY FV The issue price: Record the bond issuance on January 1, 20XA: Date Interest expense @ Interest payment e Amortization Carrying Value at end .06 .06 1/1/XA 12/31/XA $1,000.00 Record the interest payment on December 31, 20XA: Bond Liability (Carrying Value) Face (6%) $1,000 XXX XXX 9. $1000 XXX XXX XXX XXX XXX XXX XXX XXX 1 3. 4. 10 OMaturity Interest payment periods, once per year Interest expense for the FIFTH interest payment: Bond liability after the FIFTH interest payment:

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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