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. Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value. 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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

Question

Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $90,000,000 of four-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. d. The amount of the bond interest expense for the first year. Round to the nearest dollar. $

Answer 1

Question

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

D.

To determine

The amount of bond interest expense for first year.

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Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $90,000,000 of four-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. c. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. d. The amount of the bond interest expense for the first year. Round to the nearest dollar. $

Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $40,000,000 of five-year, 13% bonds at a market (effective) interest rate of 11%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest

Compute Bond Proceeds, Amortizing Premium by Interest Method, and Interest Expense Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware Co. issued $70,000,000 of five-year, 14% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following: a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 8 and Exhibit 10. Round to the nearest dollar. 4,900,000 X b. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar. 4,900,000 X d. The amount of the bond interest expense for the first year. Round to the nearest dollar. 4,900,000 X Feedback Check My Work Remember, the selling price of a bond is the sum of the present values of:…

Answer 2

Question

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

D.

To determine

The amount of bond interest expense for first year.

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Answer 3

Question

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

D.

To determine

The amount of bond interest expense for first year.

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Answer 4

Question

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

D.

To determine

The amount of bond interest expense for first year.

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Answer 5

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

D.

To determine

The amount of bond interest expense for first year.

Answer 6

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

Answer 7

Chapter 11, Problem 11.17EX

A.

To determine

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.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

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 value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The amount of cash proceeds (present value) from the sale of the bonds.

Answer 8

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

Answer 9

B.

To determine

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

Answer 10

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

Answer 11

C.

To determine

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

Answer 12

D.

To determine

The amount of bond interest expense for first year.

Answer 13

D.

To determine

The amount of bond interest expense for first year.

Answer 14

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Answer 25

Ch. 11 - Describe the two distinct obligations incurred by...Ch. 11 - Explain the meaning of each of the following terms...Ch. 11 - If you asked your broker to purchase for you a 12%...Ch. 11 - A corporation issues 26,000,000 of 9% bonds to...Ch. 11 - If bonds issued by a corporation are sold at a...Ch. 11 - Prob. 6DQ Ch. 11 - Bonds Payable has a balance of 5,000,000 and...Ch. 11 - Prob. 8DQ Ch. 11 - Prob. 9DQ Ch. 11 - Issuing bonds at face amount On January 1, the...

Solution Summary: The author explains the effective-interest method of amortization, which apportions the amount of bond discount or premium based on the market interest rate.

To calculate: The amount of discount to be amortized for the first semiannual interest payment period.

To calculate: The amount of discount to be amortized for the second semiannual interest payment period.

The amount of bond interest expense for first year.

Chapter 11 Solutions