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.

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Answer 1

Question

Chapter 14, Problem 14.26EX

(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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GeM Industries' common stock is currently selling for $72.15 per share. Last year, the company paid dividends of $1.25 per share. The projected growth rate of dividends for this stock is 4.85%. What rate of return does an investor expect to receive on this stock if it is purchased today?

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Answer 2

Question

Chapter 14, Problem 14.26EX

(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 14, Problem 14.26EX

(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 14, Problem 14.26EX

(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 14, Problem 14.26EX

(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 14, Problem 14.26EX

(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 14, Problem 14.26EX

(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 16

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Answer 17

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Solution Summary: The author explains the effective-interest method of amortization that 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.

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Chapter 14 Solutions