Question
In: Accounting
On 1/1/21 Big issued $100,000 of 11%, 20 year bonds at 104,000. The bonds are dated...
On 1/1/21 Big issued $100,000 of 11%, 20 year bonds at 104,000. The bonds are dated 1/1/21, and pay interest each 12/31.
1.Using Excel's IRR function, what is the effective rate on this bond issue?
2.What is interest expense for 2021?
3.What is interest expense for 2022?
4.What is the remaining "premium on bonds" at the end of 2024?
5.What is the balance in the "premium on bonds" at the beginning of 2029?
Solutions
Expert Solution
| Qn.1 | Particulars | ($) |
| initial investment | -104000 | |
| Year 1 income | 11000 | |
| Year 2 income | 11000 | |
| Year 3 income | 11000 | |
| Year 4 income | 11000 | |
| Year 5 income | 11000 | |
| Year 6 income | 11000 | |
| Year 7 income | 11000 | |
| Year 8 income | 11000 | |
| Year 9 income | 11000 | |
| Year 10 income | 11000 | |
| Year 11 income | 11000 | |
| Year 12 income | 11000 | |
| Year 13 income | 11000 | |
| Year 14 income | 11000 | |
| Year 15 income | 11000 | |
| Year 16 income | 11000 | |
| Year 17 income | 11000 | |
| Year 18 income | 11000 | |
| Year 19 income | 11000 | |
| Year 20 income | 11000 | |
| IRR | IRR(E4:E24) | |
| 9% |
| Qn.2 | |||
| Interest expense for 2021 | |||
| Interest rate is 11% | $100,000*11% | $11,000 |
| Qn.3 | Interest expense for 2022 | ||
| Interest rate is 11% | $100,000*11% | $11,000 |
| Qn.4 | Remaining premuim on bonds at the end of 2024 | |
| Total premuim | $4,000 | |
| life of bond | 20 years | |
| Remaining premuim on bonds at the end of 2024 | 4000-(4*200) | |
| $3,200 |
| Qn.5 | Balance in premuim on bonds at the beginning of 2029 | 4000-(8*200) |
| $2,400 |
ekkarill92 answered 2 years agoRelated Solutions
Kelly Industries issued 11% bonds, dated January 1, with a face value of $100,000 on January...
Kelly Industries issued 11% bonds, dated January 1, with a face
value of $100,000 on January 1, 2018. The bonds mature in 2028 (10
years). Interest is paid semiannually on June 30 and December 31.
For bonds of similar risk and maturity the market yield is 12%.
What was the issue price of the bonds?
Problem 1 On January 1, 2015 XYZ Company issued $100,000 of 10 year 10% bonds dated...
Problem 1 On January 1, 2015 XYZ Company issued $100,000 of 10
year 10% bonds dated January 1, 2015. Interest on the bonds are
payable semi-annually. The market rate of interest for a similar
bond with similar risk factors was also 10% Required – prepare all
the necessary journal entries and T-accounts for 2015 and 2016 and
the journal entry and T-account upon bond maturity on December 31,
2019
XYZ Company issued 10,000 shares of common stock for $1,000,000.
The...
On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of 20-year, 11% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of
20-year, 11% bonds at a market (effective) interest rate of 14%,
receiving cash of $20,001,500. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
For all journal entries: If an amount box does not require an
entry, leave it blank.
1. Journalize the entry to record the amount of
cash proceeds from the issuance...
On July 1, Year 1, Danzer Industries Inc. issued $68,000,000 of 20-year, 11% bonds at a...
On July 1, Year 1, Danzer Industries Inc. issued $68,000,000 of
20-year, 11% bonds at a market (effective) interest rate of 14%,
receiving cash of $54,404,080. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year.
Required:
For all journal entries: If an amount box does not require an
entry, leave it blank.
1. Journalize the entry to record the amount of
cash proceeds from the issuance...
Bonds Payable: On January 1, 2014 – ABC issued $800,000.00 of 20-year, 11% bonds for $739,814.81,...
Bonds Payable: On January 1, 2014 – ABC issued $800,000.00 of
20-year, 11% bonds for $739,814.81, yielding a market (yield) rate
of 12%. Interest is payable semiannually on June 30th and December
31.
a. Confirm the bond issue price.
b. Indicate the financial statement effects using the template
for
(1) bond issuance
(2) semiannual interest payable and discount amortization on
June 30, 2014
(3) semiannual interest payment and discount amortization on
December 31, 2014.
On 1/1/20, Your Company issued $250,000 of 6% bonds, dated 1/1/20. The bonds pay interest annually...
On 1/1/20, Your Company issued $250,000 of 6% bonds, dated
1/1/20. The bonds pay interest annually on December
31st. The yield is 8%. They mature in three years on
12/31/22. The bonds were issued for $237,115
Note: Be sure to show the date of each journal entry. The
‘right’ journal entry on the ‘wrong’ date is wrong.
Prepare an amortization table for all three years.
Prepare the journal entry for 1/1/20
Prepare the journal entry for 12/31/20
X Company issued at par 4-year term bonds with a par value of $100,000, dated January...
X Company issued at par 4-year term bonds with a par value of
$100,000, dated January 1, 2020, and bearing interest at an annual
rate of 6 percent payable annually on December 31. At the time of
issue, the market rate for such bonds is 9 percent. X amortizes the
discount or premium using effective interest rate method.
Required:
1- Compute the selling price of bond.
2- Record the journal entry.
3- Prepare schedual of amortization.
4- Record the adjusting...
X Company issued at par 4-year term bonds with a par value of $100,000, dated January...
X Company issued at par 4-year term bonds with a par value of
$100,000, dated January 1, 2020, and bearing interest at an annual
rate of 6 percent payable annually on December 31. At the time of
issue, the market rate for such bonds is 9 percent. X amortizes the
discount or premium using effective interest rate method.
Required:
Compute the selling price of bond.
Record the journal entry.
Prepare schedual of amortization.
Record the adjusting entries for all years....
Cutler Inc. issued $20 million of 8 year 10% callable bonds dated July 1, 2018. The...
Cutler Inc. issued $20 million of 8 year 10% callable bonds
dated July 1, 2018. The bonds were issued at 95. The bonds are
callable at 10 Burroughs uses straight-line amortization. Record
the following transactions.
Record the issuance on July 1.
Record the first payment of interest on December 31.
Record the second payment of interest on June 30.
Was the effective interest rate greater than, less than, or
equal to 10%?
Record the bonds called on July 1, 2019.
Cutler Inc. issued $20 million of 8 year 10% callable bonds dated July 1, 2018. The...
Cutler Inc. issued $20 million of 8 year 10% callable bonds
dated July 1, 2018. The bonds were issued at 95. The bonds are
callable at 10 Burroughs uses straight-line amortization. Record
the following transactions.
Record the issuance on July 1.
Record the first payment of interest on December 31.
Record the second payment of interest on June 30.
Was the effective interest rate greater than, less than, or
equal to 10%?
Record the bonds called on July 1, 2019.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You have been hired as a capital budgeting analyst by Advent Sports, a sporting goods firm...
- DESCRIBE WHAT HAPPENS WHEN WE BECOME CONSCIOUS OF SOMETHING. WHAT HAS TO HAPPEN FOR CONSCIOUS AWARENESS...
- 3) You are rolling a 12 sided die 8 times. a) What is the size for...
- explain the difference between quantitative and qualitative research strategies. Provide an example of a crime based...
- use postorder and inorder tree traversals to make preorder traversal. #!/usr/bin/env python3 # encoding: UTF-8 """Turning...
- 1. Write an if-else statement to describe an object. Print "Balloon" if isBalloon is true and...
- An investor is considering purchasing a Treasury bond with a 20 year maturity, an 8% coupon...
ADVERTISEMENT