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1. Ultimate Butter Popcorn issues 5%, 15-year bonds with a face amount of $58,000. The market...

1. Ultimate Butter Popcorn issues 5%, 15-year bonds with a face amount of $58,000. The market interest rate for bonds of similar risk and maturity is 5%. Interest is paid semiannually.
At what price will the bonds issue? (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round"Market interest rate" to 1 decimal place.)
Face Amount= Interest Payment= Market Interest Rate= Periods to maturity= issue price=

2. Pretzelmania, Inc., issues 5%, 20-year bonds with a face amount of $68,000 for $60,200 on January 1, 2018. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid annually on December 31.

Record the bond issue and first interest payment on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

3. On January 1, 2018, Frontier World issues $39.8 million of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride.

If the market rate is 8%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.) Face amount= Interest payment= market interest rate= periods to maturity= issue price=

4. On January 1, 2018, Frontier World issues $39.8 million of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride.

If the market rate is 9%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place.) Interest payment= market interest rate= periods to maturity= issue price=

The bonds will issue at: a. A discount b. A premium c. Face amount

Expert Solution

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Ultimate Butter Popcorn
Book value of bonds	58,000.00
Coupon rate	5.00%
Market rate	5.00%

As coupon and market rate is same so bonds will issue at par value i.e. $ 58,000.

Pretzel mania, Inc.
Book value of bonds	68,000.00
Coupon rate	5.00%
Interest	3,400.00

Par value of bonds	68,000.00
Issue value	60,200.00
Unamortized discount	7,800.00

Bond amortization schedule
Date	Interest payment at 5%	Interest expense at 6%	Amortization of bond discount	Debit balance in bond Premium	Credit balance in bonds payable	Book value of bonds
	Credit Cash	Debit Interest expense	Credit bond discount
Jan 1 2018				7,800.00	68,000.00	60,200.00
Dec 1 2018	3,400.00	3,612.00	212.00	7,588.00	68,000.00	60,412.00

Journal entry
Date	Account	Debit $	Credit $
Jan 1 2018	Cash	60,200.00
	Discount on Bonds Payable	7,800.00
	Bonds Payable		68,000.00

Dec 1 2018	Interest expense	3,612.00
	Discount on Bonds Payable	212.00
	Cash		3,400.00

Frontier World
Book value of bonds	39,800,000.00
Coupon rate	9.00%
Market rate	9.00%

As coupon and market rate is same so bonds will issue at par value i.e. $ 39.8 million.

Frontier World
Book value of bonds	39,800,000.00
Coupon rate	8.00%
Semi annual rate	4.00%
Semi annual interest	1,592,000.00

Market rate	9.00%
Semi annual market rate	4.50%

Issue price of bonds	Principle	Coupon Payment
Future Value	39,800,000.00	1,592,000.00
Present value factor	0.27	16.29
Present value	10,626,601.00	25,931,911.00
Price of bonds	36,558,512.00

Par value of bonds	39,800,000.00
Issue value	36,558,512.00
Unamortized Discount	3,241,488.00
The bonds will issue at: Discount

ekkarill92 answered 1 year ago

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