Present Value of Bonds Payable; Premium Moss Co. issued $100,000 of five-year, 11% bonds with interest...

Present Value of Bonds Payable; Premium

Moss Co. issued $100,000 of five-year, 11% bonds with interest payable semiannually, at a market (effective) interest rate of 8%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10.

Note: Round to the nearest dollar.

$

Solutions

Expert Solution

Par value of bonds = $100,000

Stated interest rate = 11%

Semi annual interest payment = 100,000 x 11% x 6/12

= $5,500

Market interest rate = 8%

Semi annual market interest rate = 8/2

= 4%

Bond life = 5 years or 10 semi annual years

Present value of principal to be received at the maturity = Par value of bonds x Present value factor (r%, n)

= 100,000 x Present value factor (4%, 10)

= 100,000 x 0.67556

= $67,556

Present value of interest to be received periodically over the term of the bonds = Interest x Present value annuity factor (r%, n)

= 5,500 x Present value annuity factor (4%, 10)

= 5,500 x 8.11090

= $44,610

Present value of bond = Present value of principal to be received at the maturity + Present value of interest to be received periodically over the term of the bonds

= 67,556 + 44,610

= $112,166

Exact answer may slightly differ due to rounding off and factor values considered.

ekkarill92 answered 2 weeks ago

Next > < Previous

Related Solutions

Present Value of Bonds Payable; Premium Moss Co. issued $180,000 of five-year, 11% bonds, with interest...

Present Value of Bonds Payable; Premium Moss Co. issued $180,000 of five-year, 11% bonds, with interest payable semiannually, at a market (effective) interest rate of 10%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar. $

Present Value of Bonds Payable; Premium Moss Co. issued $610,000 of five-year, 13% bonds, with interest...

Present Value of Bonds Payable; Premium Moss Co. issued $610,000 of five-year, 13% bonds, with interest payable semiannually, at a market (effective) interest rate of 11%. Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar. $

Present Value of Bonds Payable; Premium Mason Co. issued $260,000 of four-year, 13% bonds with interest...

Present Value of Bonds Payable; Premium Mason Co. issued $260,000 of four-year, 13% bonds with interest payable semiannually, at a market (effective) interest rate of 11%. Determine the present value of the bonds payable, using the present value tables in Exhibit 4 and Exhibit 5. Round to the nearest dollar. $

1. Determine the present value of five-year bonds payable with face value of $91,000 and stated...

1. Determine the present value of five-year bonds payable with face value of $91,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the market interest rate is 10%.

On January 01, 2017, ASU Corporation issued $100,000 face-value bonds, with 7% interest payable at the...

On January 01, 2017, ASU Corporation issued $100,000 face-value bonds, with 7% interest payable at the end of year, that are due in 5 years. The current market interest rate for the bonds of the same rating is 5%. Using the tables given, compute the selling price of the bonds as of January 01, 2017. Complete the following amortization table using effective-interest method. Prepare journal entries on each of the following dates. 01/01/2017 12/31/2017 12/31/2021

On January 01, 2017, ASU Corporation issued $100,000 face-value bonds, with 6% interest payable at the...

On January 01, 2017, ASU Corporation issued $100,000 face-value bonds, with 6% interest payable at the end of year, that are due in 3 years. The current market interest rate for the bonds of the same rating is 8%. (1) Using the tables given, compute the selling price of the bonds as of January 01, 2017. (2) Complete the following amortization schedule using effective-interest method. (3) Prepare journal entries on each of the following dates. a) 01/01/2017 b) 12/31/2017 c)...

Determining the present value of bonds payable Interest rates determine the present value of future amounts

Question: Determining the present value of bonds payable Interest rates determine the present value of future amounts. (Round to the nearest dollar.) Requirements 1. Determine the present value of 10-year bonds payable with face value of $86,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. 2. Same bonds payable as in Requirement 1, but the market interest rate is 16%. 3. Same bonds payable as in Requirement 1, but the...

Apple Company issued five-year 7% bonds with a face value of $100,000, for $96,567.94 on January...

Apple Company issued five-year 7% bonds with a face value of $100,000, for $96,567.94 on January 1, Year 1 when the market (effective) rate of interest was 7.5%. The bonds pay annual interest each December 31. Stanton uses the effective interest method for amortization of premium or discount on bonds payable. Round your answers to two decimal places. Required: a) What is the annual amount of cash that Stanton will pay to bondholders for interest? b) What amount of interest...

On January 1, Year 2017, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on...

On January 1, Year 2017, Kennard Co. issued $2,000,000, 5%, 10-year bonds, with interest payable on June 30 and December 31 when the market rate of interest for similar bonds was 6%. Use the following format and round figures to nearest dollar. 1. Actual proceeds received from the issuance of the bonds 2. Prepare an amortization schedule for Year 1 and Year 2 using the effective interest rate method. Date Cash Paid Interest Expense Amortization Bond Carry...

Baker Company issued $6 million of five-year 12% bonds on January 1 with interest payable on...

Baker Company issued $6 million of five-year 12% bonds on January 1 with interest payable on June 30 and December 31 each year. The bonds sold to yield 16%. Baker Company's banker is Ted who provides bond valuation as a part of her banking services (a) Calculate the value of the bond when it was sold. (b) What do you call the difference between the bond face value and the amount it was issued for?

Subjects