Calculate the issuance price of the bonds on January 1 of this Year.

Question

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Answer 1

Question

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

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Answer 2

Question

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

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Answer 3

Question

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

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Answer 4

Question

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

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Answer 5

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

Answer 6

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

Answer 7

Chapter 10, Problem 1CON

1.

To determine

Calculate the issuance price of the bonds on January 1 of this Year.

Answer 8

1.

Expert Solution

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Effective-interest method of amortization: It is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

Present Value: The current value of an amount that is to be paid or received in future is called as present value.

Determine the issuance price of the bonds.

Step 1: Calculate the cash interest payment for bonds.

Cash interest payment=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Step 2: Calculate the present value of cash interest payment.

Particulars	Amount
Interest payment (a)	$18,750,000
PV factor at annual market interest rate of 2% for 20 periods (b)	16.35143
Present value (a) ×(b)	$306,589,313

Table (1)

Note: The present value factor for 20periods at 2% interest would be 16.35143 (Refer Appendix E (Table E.2) in the book for present value factor).

Step 3: Calculate the present value of single principal payment of $750,000,000 (principal amount) at 2% for 20 periods.

Particulars	Amount
Single principal payment (a)	$750,000,000
PV factor at annual market interest rate of 2% for 20 periods (b)	0.67297
Present value (a) ×(b)	$504,727,500

Table (2)

Note: The present value factor for 20periods at 2% interest would be 0.67297 (Refer Appendix E (Table E.1) in the book for present value factor).

Step 4: Calculate the issue price of the bonds.

Issue price of the bonds =(Present value of interest payment + Present value of single principal payment)=($306,589,313(from table 1)+$504,727,500(from table 2)) =$811,316,813

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

Hence, The issuance price of the bondson January 1 of this Year is $811,316,813.

Answer 13

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

Answer 14

2.

To determine

Calculate the amount of interest expense that should be recorded on June 30 of this year.

Answer 15

2.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on June 30 of this year.

Interest expense=(Book value of bond (issue price)×Market interest rate×Interest time period)= $811,316,813×4%×12=$16,226,336

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Conclusion

Hence, amount of interest expense that should be recorded on June 30 of this year is $16,226,336.

Answer 20

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

Answer 21

To determine

Calculate the amount of interest expense that should be recorded on December 31 of this year.

Answer 22

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Interest Expense: The cost of debt which is occurred during a particular period of time is called interest expense. The interest amount is payable on the principal amount of debt at a fixed interest rate.

Calculate the amount of interest expense that that should be recorded on December 31 of this year.

Interest expense=(Book value of bond ×Market interest rate×Interest time period)= ($811,316,813−($18,750,000−$16,226,336))×4%×12=$16,175,863

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Conclusion

Hence, amount of interest expense that should be recorded on December 31 of this year is $16,175,863.

Answer 27

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

Answer 28

3.

To determine

Calculate the amount of cash that should be paid to investors on June 30 of this year.

Answer 29

3.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on June 30 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Answer 30

3.

Expert Solution

Answer 31

3.

Expert Solution

Answer 32

Expert Solution

Answer 33

Conclusion

Hence, amount of cash that should be paid on June 30 of this year is $18,750,000.

Answer 34

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

Answer 35

To determine

Calculate the amount of cash that should be paid on December 31 of this year.

Answer 36

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Calculate the amount of cash that should be paid on December 31 of this year.

Cash paid=Face value×Coupon rate×Interest time period=$750,000,000×5%×12=$18,750,000

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Conclusion

Hence, amount of cash that should be paid on December 31 of this year is $18,750,000.

Answer 41

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

Answer 42

4.

To determine

Calculate the book value of the bonds on June 30 of this year.

Answer 43

4.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on June 30 of this year.

Book value of bond on June 30 =(Beginning book value of bonds − Premium amortized on June 30) =($811,316,813−($18,750,000−$16,226,336))=$808,793,149

Answer 44

4.

Expert Solution

Answer 45

4.

Expert Solution

Answer 46

Expert Solution

Answer 47

Conclusion

Hence, the book value of the bonds on June 30 of this year is $808,793,149.

Answer 48

To determine

Calculate the book value of the bonds on December 31 of this year.

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012

Conclusion

Hence, the book value of the bonds on December 31 of this year is $806,219,012.

Answer 49

To determine

Calculate the book value of the bonds on December 31 of this year.

Answer 50

Expert Solution

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Determine the book value of the bonds on December 31 of this year.

Book value of bond on December 31 =(Beginning book value of bonds − Premium amortized on June 30−Premium amortized on December 31) =(($811,316,813−($18,750,000−$16,226,336))−($18,750,000−$16,175,863))=$806,219,012