On January 1, 2023, Ajax Ltd. issued $10 million in bonds. The bonds have a 10-year...

On January 1, 2023, Ajax Ltd. issued $10 million in bonds. The bonds have a 10-year term, 6% annual market interest rate, and pay interest semiannually. The seventeenth semiannual payment of $400,000 consisted of $311,15, interest and $88,849 premium amortization, after which the carrying amount was reduced to $10,282,861. What is the carrying value of the bonds after the eighteenth semiannual payment of $400,000?

Solutions

Expert Solution

Market interest rate = 6%

Semi annual interest payment = $400,000

Carrying value of bonds after seventeenth semi annual payment = $10,282,861

Interest expense for eighteenth payment period = Carrying value of bonds after seventeenth semi annual payment x Market interest rate x 6/12

= 10,282,861 x 6% x 6/12

= $308,486

Amortization of bond premium in eighteenth semi annual payment = Semi annual interest payment- Interest expense for eighteenth payment period

= 400,000-308,486

= $91,514

Carrying value of the bonds after the eighteenth semiannual payment = Carrying value of bonds after seventeenth semi annual payment - Amortization of bond premium in eighteenth semi annual payment

= 10,282,861-91,514

= $10,191,347

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

On January 1, 2023, Ajax Ltd. issued $10 million in bonds. Thebonds have a 10-year...

On January 1, 2023, Comet Products issued $40 million of 6%, 10-year convertible bonds at a...

On January 1, 2023, Comet Products issued $40 million of 6%, 10-year convertible bonds at a net price of $40.8 million. The effective interest rate on the bond is 6.1352734%. Comet recently issued similar, but nonconvertible, bonds at 99 (that is, 99% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 20 shares of Comet's no par ordinary shares. On June 1, 2025, Comet notified bondholders of its intent to...

On January 1, 2018, CT Ltd issued $20 million convertible bonds. The bonds have a life...

On January 1, 2018, CT Ltd issued $20 million convertible bonds. The bonds have a life of three years and are issued at 21 million with a face value of $100 per bond. The bonds pay an interest of 6% annually in arrears. The holder of each bond is entitled to convert the bond into 25 ordinary shares of CT Ltd at any time up to maturity. Companies of a similar risk profile have recently issued debt with similar terms,...

On January 1, 2027, Ajax Corporation had 10 million shares of common stock, issued and outstanding....

On January 1, 2027, Ajax Corporation had 10 million shares of common stock, issued and outstanding. On October 1, 2027 Ajax issued an additional 1 million shares of common stock. Ajax also has $40 million face value, 6.25% convertible bonds outstanding for the entire year. The bonds are convertible into 2 million common shares. Ajax has a tax rate of 40% and net income of $14 million in 2027. What is Ajax’s diluted earnings per share for 2027? $1.35 $1.27...

On January 1, 20D, Janus Company issued $5 million of 10-year bonds at a 10% stated...

On January 1, 20D, Janus Company issued $5 million of 10-year bonds at a 10% stated interest rate to be paid semiannually. Assume straight-line amortization. 15. If Janus issued the bonds at a price of 106.5, the amount of interest expense on June 20, 20D equals: (a) $467,500 (b) $440,875 (c) $233,750 (d) $222,044 16. If Janus issued the bonds at a price of 106.5, what is the book value of Janus' bonds on July 1, 20D after the interest...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face...

. The Stylist Company issued 20-year bonds on January 1. The 10% bonds have a face value of $900,000 and pay interest every January 1 and July 1. The bonds were sold for $982,808 based on the market interest rate of 9%. Stylist uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Stylist should record which of the following journal entries when the interest is paid. (round to the nearest dollar)...

On January 1, 2018, Legoria Co. issued $50 Million of 7%, 10-year bonds at $51.9 million....

On January 1, 2018, Legoria Co. issued $50 Million of 7%, 10-year bonds at $51.9 million. Legoria Co issued similar, but nonconvertible bonds at 99 (that is, 99% of face amount). The Bonds pay interest semiannually on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of $1 par common stock. Legoria Co. amortizes the bond using straight-line. On June 30, 2020 Legoria Co called in all of the bonds at a 4% premium. On June...

On January 1, 2016, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101....

On January 1, 2016, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 15% of the issue as an investment. Required: 1. Prepare the journal entries for...

On January 1, 2021, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101....

On January 1, 2021, Gless Textiles issued $21 million of 10%, 10-year convertible bonds at 101. The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 40 shares of Gless’s no par common stock. Bonds that are similar in all respects, except that they are nonconvertible, currently are selling at 99 (that is, 99% of face amount). Century Services purchased 15% of the issue as an investment. Required: 1. Prepare the journal entries for...

On January 1, 2018, Fowl Products issued $78 million of 8%, 10-year convertible bonds at a...

On January 1, 2018, Fowl Products issued $78 million of 8%, 10-year convertible bonds at a net price of $79.4 million. Fowl recently issued similar, but nonconvertible, bonds at 98 (that is, 98% of face amount). The bonds pay interest on June 30 and December 31. Each $1,000 bond is convertible into 30 shares of Fowl’s no par common stock. Fowl records interest by the straight-line method. On June 1, 2020, Fowl notified bondholders of its intent to call...

Subjects