1)
a)
• Bonds are long term negotiable instruments of debt issued by corporate entities to secure funds from the public.
• These funds are used to either fund long term capital expenditure or similar long term investment opportunities.
• Bonds represent steady income for the investor in the form of periodic interest payments by the entity issuing the bond. Bonds are issued at par, at premium or at a discount.
• Bond Price is the maximum price that an investor will pay for a bond. It is calculated as the present value of the bond.
Price of $100000, 8% bond issued at 75.25.
b)
Bond Price
• Bonds are long term negotiable instruments of debt issued by corporate entities to secure funds from the public.
• These funds are used to either fund long term capital expenditure or similar long term investment opportunities.
• Bonds represent steady income for the investor in the form of periodic interest payments by the entity issuing the bond. Bonds are issued at par, at premium or at a discount.
• Bond Price is the maximum price that an investor will pay for a bond. It is calculated as the present value of the bond.
Price of $100000, 8% bond issued at 103.50
c)
Bond Price
• Bonds are long term negotiable instruments of debt issued by corporate entities to secure funds from the public.
• These funds are used to either fund long term capital expenditure or similar long term investment opportunities.
• Bonds represent steady income for the investor in the form of periodic interest payments by the entity issuing the bond. Bonds are issued at par, at premium or at a discount.
• Bond Price is the maximum price that an investor will pay for a bond. It is calculated as the present value of the bond.
Price of $100000, 8% bond issued at 94.50
d)
Bond Price
• Bonds are long term negotiable instruments of debt issued by corporate entities to secure funds from the public.
• These funds are used to either fund long term capital expenditure or similar long term investment opportunities.
• Bonds represent steady income for the investor in the form of periodic interest payments by the entity issuing the bond. Bonds are issued at par, at premium or at a discount.
• Bond Price is the maximum price that an investor will pay for a bond. It is calculated as the present value of the bond.
Price of $100000, 8% bond issued at 103.25
2)
Retirement of Bonds
• When a bond is issued at a discount or at premium or at face value, the amount to be repaid as the principal amount is the face value of the bonds.
• When a bond is issued at a discount, the difference between the issue price and the face value is the cost to be borne by the company.
• Bonds are issued at a discount when the stated rate of interest is less than the market rate of interest.
Which of the bonds will have maximum
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Chapter 14 Solutions
Horngren's Accounting: The Managerial Chapters, Student Value Edition (12th Edition)
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