1. a
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase
b.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
c.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
d.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
2.
To find: The maturity value of the bonds.
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Check out a sample textbook solutionChapter 12 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
- a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.arrow_forwardThe Excel file Immunization Using Individual Bonds contains information about three bonds. Use this data to: Yield to maturity (Expected/Current) 7% Number of Years to Future Liability 8 Future Liability $ 3,000.00 Bond 1 Bond 2 Bond 3 Coupon rate 8.00% 9.000% 7.00% Maturity 9 24 15 Face value 1,000 1,000 1,000 Explain which bond you prefer to use to attempt to immunize this obligation which is due in 8 years. Analyze each bond’s performance in attempting to achieve immunization Please show work in excel and functions/equations used.arrow_forwardGiven the information below, which bond(s) will be issued at a premium? Bond 1 Bond 2 Bond 3 Bond 4 Stated Rate of Return 5% 10 % 15% 12% Market Rate of Return 5% 8% 12% 14% Bond 1. Bond 2. Bond 4. Bonds 2 and 3.arrow_forward
- Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) O A. Bond Bond Value A B C O B. Bond A B C O C. Bond A B с O D. Bond A B C $1,149.39 Discount $1,000.00 Par $85.60 Premium Bond Value Sells at par/discount/premium Bond Value $1,149.39 Premium $1,000.00 Par $85.60 Discount Sells at par/discount/premium Bond Value Sells at par/discount/premium $1,149.39 Premium $1,000.00 Par $85.60 Premium Sells at par/discount/premium $1,049.39 Premium $1,100.00 Premium $85.60 Discount Bond Par value Coupon interest Years to rate maturity JA B IC $1000 14% $1000 18% $100 10% 120 16 18 Required return 12% 8% 13%arrow_forwardCalculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Time Coupon Market Rate Accrued Commission Bonds Total Interest per Bond Purchased Price Company Since Last Price Interest Company 2 9.4 79.75 23 days $9.95 15arrow_forward2 parts a-carrow_forward
- Complete the table Find the market pricearrow_forwardb. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bondsarrow_forward1. Calculate the total annual interest, total cost, and current yield for the bonds. (Round the"Current yield" to the nearest tenth percent and other answers to the nearest whole dollar.)Bond Number of bonds purchased Selling price Total annual interest Total cost Current yieldMuni 5 22 6 81.375 $ $ %arrow_forward
- Calculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Market Price Time Since Last Accrued Interest Commission Coupon Rate Bonds Purchased Total Price Company per Bond Interest Company 2 9.8 79.75 23 days $ 6.26 $9.35 15 $ 1149.9arrow_forwardneat and clean answer neededarrow_forwardUrmilabenarrow_forward
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