Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Textbook Question
Chapter F, Problem F.7Q
What is the present
- a. $5,614
- b. $7,060
- c. $6,000
- d. $6,330
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Students have asked these similar questions
Calculate the selling price of the following 5-year bond issue:
e.
# bonds
Bond rate of interest
Interest payable
Market rate of interest
Bond maturity (face) value
600
5.8%
semi-annually
6.0%
$1,000
Give typing answer with explanation and conclusion
1- Imagine the bond above displayed the following details: $10,000 Matures: January 31, 2030; Interest of $200 payable June 30 and December 31 of each year. Can you calculate the annual effective interest rate for this bond?
a)2%
b)4%
c)6%
d)One cannot tell.
What account would be debited (1), what account would be credit (2), and what amount would be paid to record the journal entry for each interest payment based
on a $200,000 five-year, 10% bond and the bond was issued at $192,462 (11%) and interest is paid semiannually?
JOURNAL
Page
25
DATE
DESCRIPTION
P.REF.
DEBIT
CREDIT
(1)
?
(2)
?
(1) Interest Expense debit $11,000, and (2) Cash credit $11,000
(1) Interest Expense debit $10,000 and (2) Cash credit $10,000
(1) Cash debit $20,000 and (2) Interest Expense credit $20,000
(1) Cash debit $22,000, and (2) Interest Expense credit $22,000
Chapter F Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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- A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?arrow_forwardAnswers in page 237arrow_forwardCompute bond proceeds, amortizing premium by interest method, and interest expense DATA Face amount of bonds Contract rate of interest Term of bonds, years Market rate of interest Interest payment REQUIRED: a. Compute the amount of cash proceeds from the sale of the bonds. $41,000,000 11% 3 9% Semiannual b. Compute the amount of premium to be amortized for the first semiannual interest payment period, using the interest method. c. Compute the amount of premium to be amortized for the second semiannual interest payment period, using the interest method. d. Compute the amount of the bond interest expense for the first year. Using formulas and cell references from the problem data, perform the required analysis. Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading. a. PV of cash proceeds b. Premium amortized for the 1st interest payment period c. Premium amortized for the 2nd interest payment period d. Interest expense for the 1st year…arrow_forward
- Bonds pay the face value to the investor when they are a. held over 10 years. b. held 20 years. c. held until maturity. d. sold on the market before maturity.arrow_forward4. What is the carrying value of the bonds at the end of the second period (third number)? Premium 57,913.01 Carrying value (bonds) 432,913.01 Face Rate Market Rate Semiannual payments a. b. Cash Payment C. d. e. 14% 10% 0 or 1 2 or 3 4 or 5 6 or 7 8 or 9 Interest Expense Today Period #1 26,250.00 Period #2 26,250.00 Carrying value at end of second period (third number) ___________?__ 2. Disc. or Prem. Amort. 21,645.65 21,415.43 Disc. or Prem. 4,604.35 4,834.57 57,913.01 53,308.66 48,474.10 Face Value 375,000.00 375,000.00 375,000.00 Carrying Value 432,913.01 428,308.66 423,474.10arrow_forwardYour company issues $3,500,000 bonds at 7% interest with annual interest payments. Bonds have a maturity date in 30 years. At the time of issue, the market rate is 5%. а. Calculate the issue price of the bond. b. Record the journal entry for the issue of the bond С. Record the journal entry for the first interest payment d. How much interest is recorded on the income statement in Year 1? е. Record the journal entry for the final entry at the bond maturity date.arrow_forward
- b. 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_forwardGiven the following data of a bond: Face amount P1, 500 Bond Interest rate 6% Interest paid semi-annually P45.00 Terms 10 years Up for sale at the end of 3 years, 7 years to go. The buyer of the bond wishes to earn at the rate of 8% a year compounded semi-annually. What is its fair value at the end of the third year when it is offered for sale? O P1,975.34 O P633.79 O P2,366.21 O P1,341.55arrow_forward5 On January 1, Ruiz Company issued bonds as follows: Face Value: Number of Years: Stated Interest Rate: Interest payments per year 7 B 9 0 1 2 AWN IC $500,000 a) Required: 1) Calculate the bond selling price given the two market interest rates below. Use formulas that reference data from this worksheet and from the appropriate future or present value tables (found by clicking the tabs at the botto this worksheet). Note: Rounding is not required. 15 7% 2 Annual Market Rate Semiannual Interest Payment: PV of Face Value: +PV of Interest Payments: Bond Selling Price: Annual Market Rate Semiannual Interest Payment: PV of Face Value: +PV of Interest Payments: = Bond Selling Price: 9% $17,500 133,500.01 285,055.55 418,555.56 6.00% $17,500 205,993.38 5343,007.72 $549,001.10 +arrow_forward
- Margaret Company provided the following information in relation to the issuance of bonds at the beginning of current year: Face amount P800,000 Term Ten years Stated interest rate 6% Interest payment date Annually on December 31 Yield 9% At 6% At 9% Present value of 1 for 10 periods 0.558 0.422 Future value of 1 for 10 periods 1.791 2.367 Present value of an ordinary annuity of 1 for 10 periods 7.360 6.418 What is the issue price for each P1,000 bond? 1,000 864 807 700arrow_forwardA Interest payments per year 13 14 15 a) 16 17 18 19 20 21 22 23 24 25 26 b) B Annual Market Rate Semiannual Interest Payment: PV of Face Amount: PV of Interest Payments: + = Bond Selling Price: $500,000 15 7% 2 1 2 On January 1, Ruiz Company issued bonds as follows: 3 4 Face Amount: 5 Number of Years: 6 Stated Interest Rate: 7 8 9 Required: 10 1) Calculate the bond selling price given the two market interest rates below. 11 Use formulas that reference data from this worksheet and from the appropriate future or present value tables (found by clicking the tabs at the bottom of 12 this worksheet). Note: Rounding is not required. Annual Market Rate Semiannual Interest Payment: PV of Face Amount: + PV of Interest Payments: = Bond Selling Price: C 29 The bond in (a) sold at a: 30 The bond in (b) sold at a: 31 32 3. Use the Excel PV function to verify the selling prices of the bonds. 33 a) Annual Market Rate 34 Bond Selling Price 35 36 b) 37 Annual Market Rate Bond Selling Price 27 2. Use…arrow_forward9. Sean Corp. issued a $40,000, 10-year bond, with a stated rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period? a.$1,600 b.$4,000 c.$3,200 d.$800arrow_forward
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