Question
In: Accounting
On January 1, 2016, Learned, Inc., issued $70 million face amount of 20-year, 14% stated rate...
On January 1, 2016, Learned, Inc., issued $70 million face amount of 20-year, 14% stated rate bonds when market interest rates were 16%. The bonds pay semiannual interest each June 30 and December 31 and mature on December 31, 2035. Assuming Learned, Inc. uses the effective (compound) interest method, what would be the total interest expense for 2016? Hint: you will need to calculate interest expense as of June 30, 2016 and then December 31, 2016 to determine the total interest expense for the year. Be sure to round your answer to the nearest dollar.
Solutions
Expert Solution
| Proceeds of the bond = 70000000/1.08^40+70000000*7%*(1.08^40-1)/(0.08*1.08^40) = | $ 6,16,52,771 | |
| 1) | Interest for the HYE 30th June, 2016 = 61652771*8% = | $ 49,32,222 |
| Interest paid = 70000000*7% = | $ 49,00,000 | |
| Discount amortized | $ 32,222 | |
| 2) | Carrying value of the second half of 2016 = 61652772+32222 = | $ 6,16,84,992 |
| Interest for the second half of 2016 on 61684992 at 8% = | $ 49,34,799 | |
| 3) | Total interest expense for 2016 | $ 98,67,021 |
ekkarill92 answered 5 months agoRelated Solutions
On January 1, 2019, Learned Inc. issued $105 million face amount of 20-year, 14% stated rate...
On January 1, 2019, Learned Inc. issued $105 million face amount
of 20-year, 14% stated rate bonds when market interest rates were
16%. The bonds pay interest semiannually each June 30 and December
31 and mature on December 31, 2038. Table 6-4, Table 6-5 (Use
appropriate factor from the table provided.) b-1. Assume instead
that the proceeds were $108,600,000. Use the horizontal model to
record the payment of semiannual interest and the related premium
amortization on June 30, 2019, assuming...
On January 1, 2019, Drennen Inc. issued $5 million face amount of 10-year, 14% stated rate...
On January 1, 2019, Drennen Inc. issued $5 million face
amount of 10-year, 14% stated rate bonds when market interest rates
were 12%. The bonds pay semiannual interest each June 30 and
December 31 and mature on December 31, 2028.
a. Calculate the proceeds (issue price) of
Drennen Inc.'s bonds on January 1, 2019, assuming that the bonds
were sold to provide a market rate of return to the investor.
(Round PV factor to 4 decimal places.)
b-1. Assume instead...
On January 1, 2019, Drennen Inc. issued $4.6 million face amount of 8-year, 14% stated rate...
On January 1, 2019, Drennen Inc. issued $4.6 million face amount
of 8-year, 14% stated rate bonds when market interest rates were
12%. The bonds pay semiannual interest each June 30 and December 31
and mature on December 31, 2026. Table 6-4, Table 6-5 (Use
appropriate factor from the table provided.)
Required:
a. Calculate the proceeds (issue price) of Drennen Inc.'s
bonds on January 1, 2019, assuming that the bonds were sold to
provide a market rate of return to...
On January 1, 2018, Instaform, Inc., issued 14% bonds with a face amount of $50 million,...
On January 1, 2018, Instaform, Inc., issued 14% bonds with a
face amount of $50 million, dated January 1. The bonds mature in
2037 (20 years). The market yield for bonds of similar risk and
maturity is 16%. Interest is paid semiannually. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1-a. Determine the price of the bonds at January 1,
2018....
On january 1, 2017, A company issued 12% stated rate bonds with a face amount of...
On january 1, 2017, A company issued 12% stated rate bonds with a face amount of $200 million. The bonds mature on january 1, 2027 and market rate was 14%.
Please answer the following:
1.n=
2.i=
3.Total present value of interest payment=
4.Total present value of principal=
5.Total price of bonds=
The Bradford Company issued 8% bonds, dated January 1, with a face amount of $70 million...
The Bradford Company issued 8% bonds, dated January 1, with a
face amount of $70 million on January 1, 2018 to Saxton-Bose
Corporation. The bonds mature on December 31, 2032 (15 years). For
bonds of similar risk and maturity, the market yield is 10%.
Interest is paid semiannually on June 30 and December 31. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.):...
The Bradford Company issued 8% bonds, dated January 1, with a face amount of $70 million...
The Bradford Company issued 8% bonds, dated January 1, with a
face amount of $70 million on January 1, 2018 to Saxton-Bose
Corporation. The bonds mature on December 31, 2032 (15 years). For
bonds of similar risk and maturity, the market yield is 10%.
Interest is paid semiannually on June 30 and December 31. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.):...
The Bradford Company issued 14% bonds, dated January 1, with a face amount of $89 million...
The Bradford Company issued 14% bonds, dated January 1, with a
face amount of $89 million on January 1, 2018. The bonds mature on
December 31, 2027 (10 years). For bonds of similar risk and
maturity, the market yield is 16%. Interest is paid semiannually on
June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
Required:
1. Determine...
Universal Foods issued 14% bonds, dated January 1, with a face amount of $145 million on...
Universal Foods issued 14% bonds, dated January 1, with a face
amount of $145 million on January 1, 2018 to Wang Communications.
The bonds mature on December 31, 2032 (15 years). The market rate
of interest for similar issues was 16%. Interest is paid
semiannually on June 30 and December 31. Universal uses the
straight-line method. Universal Foods sold the entire bond issue to
Wang Communications. (FV of $1, PV of $1, FVA of $1, PVA of $1,
FVAD of...
On January 1, 2016, Plywood Homes, Inc., issued 20‐year, 4 percent bonds having a face value...
On January 1, 2016, Plywood Homes, Inc., issued 20‐year, 4
percent bonds having a face value of $1 million. The interest on
the bonds is payable semiannually on June 30 and December 31. The
proceeds to the company were $975,000 (i.e., on the day they were
issued the bonds had a market value of $975,000). On June 30, 2016,
the company’s fiscal closing date, when the bonds were being traded
at 98 ½, each of the following amounts was suggested...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
- In C++ Having call-by-reference allows one to use storeback parameters, i.e., parameters whose values are transmitted...
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
- THIS PROGRAM HAS TO BE WRITTEN IN C Single function to perform the parity computation on...
ADVERTISEMENT