Question
In: Accounting
Enviro Company issues 8%, 10-year bonds with a par value of $310,000 and semiannual interest payments....
Enviro Company issues 8%, 10-year bonds with a par value of $310,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1⁄2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 ½, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date?
Solutions
Expert Solution
1. Issuer's cash proceeds from issuance of these bonds = Face Value * Selling Price / 100
Issuer's cash proceeds from issuance of these bonds = 310000 * 87.50 / 100
Issuer's cash proceeds from issuance of these bonds = $271250
2. Total amount of bond interest expense will be recognized over the life of these bonds
Total amount of bond interest expense will be recognized = Discount on Bond + Interest on Bond
Total amount of bond interest expense will be recognized = 310000 * 12.5 / 100 + 310000 * 8% * 10
Total amount of bond interest expense will be recognized = 37850 + 248000
Total amount of bond interest expense will be recognized = $286750
3. The amount of bond interest expense recorded on the first interest payment date
The amount of bond interest expense = Discount of Bond / 20 + Interest
The amount of bond interest expense = 37850 / 20 + 310000 * 8% * 1 /2
The amount of bond interest expense = 1937.5 + 12400
The amount of bond interest expense = $14337.50
ekkarill92 answered 1 year agoRelated Solutions
Enviro Company issues 10%, 10-year bonds with a par value of $250,000 and semiannual interest payments....
Enviro Company issues 10%, 10-year bonds with a par value of
$250,000 and semiannual interest payments. On the issue date, the
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Assume the bonds are issued for cash on January 1, 2017.
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Enviro Company issues 6.50%, 10-year bonds with a par value of
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Garcia Company issues 10%, 15-year bonds with a par value of
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annual market rate for these bonds is 8%, which implies a selling
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what are the issuer's cash proceeds from issuance of these
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Marwick Corporation issues 8%, 5 year bonds with a par value of $1,150,000 and semiannual interest...
Marwick Corporation issues 8%, 5 year bonds with a par value of
$1,150,000 and semiannual interest payments. On the issue date, the
annual market rate for these bonds is 6%. What is the bond's issue
(selling) price, assuming the following Present Value
factors:
n=
i=
Present Value of an
Annuity
Present value
of $1
5
8
%
3.9927
0.6806
10
4
%
8.1109
0.6756
5
6
%
4.2124
0.7473
10
3
%
8.5302
0.7441
Multiple Choice
$1,248,104
$757,611
$1,150,000
$939,244...
Matthew Company issued 10-year, 7% bonds (paying semiannual interest) with a par value of $100,000. The...
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The following information is used to answer Bonds: $3,000,000 Par Value Semiannual Interest Payments Three-Year Life...
The following information is used to answer
Bonds: $3,000,000 Par Value
Semiannual Interest Payments
Three-Year Life
Annual Contract Rate: 12%
Annual Market Rate: 10%
Question:
What is the semi-annual cash payment to the
bondholder?
A. $150,000
B. $160,000
C. $170,000
D. $180,000
What is the total amount of interest expense over the
life of the bond?
A. $927,729.24
B. $945,756.32
C. $955,798.51
D. $963,877.98
Softbyte Inc.
Balance Sheet
December 31, 2017
Assets
Cash
$500,000
Accounts
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The following information is used to answer: Bonds: $1,000,000 Par Value Semiannual Interest Payments, Three-Year Life...
The following information is used to
answer:
Bonds: $1,000,000 Par Value
Semiannual Interest Payments,
Three-Year Life
Annual Contract Rate: 6%
Annual Market Rate: 8%
What is the semi-annual cash payment to the
bondholder?
A. 25,000
B. 30,000
C. 35,000
D. 40,000
What is the interest expense for the second semi-annual
payment under the effective interest method?
A. 37,903.15
B. 38,219.27
C. 38,548.04
D. 38,889.96
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Balance Sheet
December 31, 2017
Assets
Cash
$500,000
Accounts
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The following information is used to answer: Bonds: $1,000,000 Par Value Semiannual Interest Payments, Three-Year Life...
The following information is used to
answer:
Bonds: $1,000,000 Par Value
Semiannual Interest Payments,
Three-Year Life
Annual Contract Rate: 6%
Annual Market Rate: 8%
What is the price of the bond?
A. 963,544.12
B. 952,877.65
C. 947,578.63
D. 925,587.96
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A. 52,421.37
B. 50,865.35
C. 47,822.45
D. 45,647.24
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Balance Sheet
December 31, 2017
Assets
Cash
$500,000
Accounts
Receivable
700,000
Inventory
300,000
Property, Plant & Equipment
900,000...
Compute the selling price of 10%, 10-year bonds with a par value of $360,000 and semiannual...
Compute the selling price of 10%, 10-year bonds with a par value
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cash flow
table value
present value
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18,000 interest payment
Price of Bond
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