Concept Introduction:
Bonds: Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Issue Price : The issue price is the amount of money received the borrower from the issue of bonds. The bonds may be issued at a higher or lower price than their face value that means on premium or on discount.
Contract rate : Contract rate is the rate of interest prescribed in the bond indenture that shall be paid to the bondholder periodically.
Market rate : Market rate is the rate of interest for the same type of bonds prevailing in the market. There may be a difference between the contract rate and market rate of interest on bonds. Due to the difference, the bonds are issued at premium or discount.
Requirement-a:
The amount of annual interest payment on the bonds
Concept Introduction:
Bonds: Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Issue Price : The issue price is the amount of money received the borrower from the issue of bonds. The bonds may be issued at a higher or lower price than their face value that means on premium or on discount.
Contract rate : Contract rate is the rate of interest prescribed in the bond indenture that shall be paid to the bondholder periodically.
Market rate : Market rate is the rate of interest for the same type of bonds prevailing in the market. There may be a difference between the contract rate and market rate of interest on bonds. Due to the difference, the bonds are issued at premium or discount.
Requirement-b:
If the bonds were issued at premium or discount
Concept Introduction:
Bonds: Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.
Issue Price : The issue price is the amount of money received the borrower from the issue of bonds. The bonds may be issued at a higher or lower price than their face value that means on premium or on discount.
Contract rate : Contract rate is the rate of interest prescribed in the bond indenture that shall be paid to the bondholder periodically.
Market rate : Market rate is the rate of interest for the same type of bonds prevailing in the market. There may be a difference between the contract rate and market rate of interest on bonds. Due to the difference, the bonds are issued at premium or discount.
Requirement-c:
If the interest expense amount shall be more, less, or equal to the interest payment in each year
Want to see the full answer?
Check out a sample textbook solution
Chapter 7 Solutions
Accounting: What the Numbers Mean
- You are the partner-in-charge of a large metropolitan office of a regional public accounting firm. Two members of your professional staff have come to you to discuss problems that may affect the firm's independence. Neither of these situations has been specifically answered by the AICPA Professional Ethics Division. Case 1: Don Moore, a partner in the firm, has recently moved into a condominium that he shares with his girlfriend, Joan Scott. Moore owns the condominium and pays all the expenses relating to its maintenance. Otherwise, the two are self-supporting. Scott is a stockbroker, and recently she has started acquiring shares in one of the audit clients of this office of the public accounting firm. The shares are held in Scott's name. At present, the shares are not material in relation to her net worth. 1. What arguments would indicating that the firm's independence has not been impaired? 2. What arguments would indicating that the firm's independence has been impaired? 3. Which…arrow_forwardExamine the importance of proper evaluation of investment projects.arrow_forwardAndretti Company has a single product called a Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 10.00 Direct labor 4.50 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 5.00 ($300,000 total)Variable selling expenses 1.20 Fixed selling expenses 3.50 ($210,000 total)Total cost per unit $ 26.50 The company has 1,000 Daks on hand with some irregularities that make it impossible to sell them at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price to liquidate these units?arrow_forward
- The financial manager at Rico Ltd had to choose between these two projects, alpha and beta, which have the following net cash inflows: Year Alpha Beta 1 5,000 36,000 2 18,500 36,500 3 36,200 37,000 4 123,000 175,000 Each project requires an initial investment of 118,000. No scrap values are forecast. Required:1. Calculate the payback period for each project. Answers must be expressed in years and months. Which project should be chosen and why? 2. Calculate the Net Present Value (NPV) for each project, using a discount rate of 12%. Which project would you choose and why? 3. Calculate the internal Rate of Return for each project. Which project should be chosen and Why?arrow_forwardCritically evaluate the strengths and limitations of the Capital Asset Pricing Model.arrow_forward1. Provide a brief history of the tax system in Jamaica, highlighting the different types of taxes used in the country. 2. Identify and discuss at least 6 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education