Presley Company sells $1,000,000 general obligation bonds for 102. The interest rate on the bonds, paid...

Presley Company sells $1,000,000 general obligation bonds for 102. The interest rate on the bonds, paid quarterly, is 5 percent.

a. Calculate the amount that the company will actually receive from the sale of the bonds.

b. Calculate the amount of both the quarterly and the total annual cash interest that the company will be required to pay.

Solutions

Expert Solution

Amount received on sale of bond

$ 10,20,000

Working:

Amount received on sale of bond

Par Value * % of par value

$ 10,00,000

* 102%

$ 10,20,000

Quarterly coupon interest paid in cash

Par Value * Quarterly coupon rate

$ 10,00,000

* 5% *1/4

$ 12,500

Annual coupon interest paid in cash

Quarterly coupon interest paid in cash * Quarters in a year

$ 12,500

* 4

$ 50,000

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

A company issues $1,000,000 of 20-year 10% bonds that pay interest semiannually. The market rate for...

A company issues $1,000,000 of 20-year 10% bonds that pay interest semiannually. The market rate for bonds of similar risk is 9%. Prepare the journal entries to record the issuance of the bond and the first two interest payments. : Please walk through interest journal entries

ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at a market rate of...

ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at a market rate of 6%. They are 5 year bonds. This sale occurred January 1, 2019. a. Provide an amortization schedule using the effective interest rate method for the entire life of the bond. b. Show the journal entry for the January sale. c. Show the journal entry for the first interest payment date. NOTE: A good search term for finding examples is "effective interest rate method example"...

Lemon Co. sells $1,000,000 of 10% bonds on August 1, 2017. The bonds pay interest on...

Lemon Co. sells $1,000,000 of 10% bonds on August 1, 2017. The bonds pay interest on February 1 and August 1. The due date of the bonds is August 1, 2020. The bonds yield 12%. On October 1, 2018, Lemon Co. buys back $200,000 worth of bonds for $218,000 (includes accrued interest). Give entries through October 1, 2018. When doing the amortization table, please show your work in excel! Thanks

Lemon Co. sells $1,000,000 of 10% bonds on August 1, 2017. The bonds pay interest on...

Lemon Co. sells $1,000,000 of 10% bonds on August 1, 2017. The bonds pay interest on February 1 and August 1. The due date of the bonds is August 1, 2020. The bonds yield 12%. On October 1, 2018, Lemon Co. buys back $200,000 worth of bonds for $218,000 (includes accrued interest). Give entries through October 1, 2018 What is the present value of the bond at the date of issuance? What is the amount of interest expense as of...

Bond Effective Interest Rate Method of amortization 1. ABC Company sold $1,000,000 of 5% bonds with...

Bond Effective Interest Rate Method of amortization 1. ABC Company sold $1,000,000 of 5% bonds with interest due semi-annually at 103. They are 5 year bonds. This sale occurred January 1, 2019. a. Provide an amortization schedule using the effective interest rate method for the entire life of the bond. b. Show the journal entry for the January sale. c. Show the journal entry for the first interest payment date. NOTE: A good search term for finding examples is "effective...

Assume that Candlestick Company sells $100,000, 5 year, 10% bonds at $98,000. Interest is paid semiannually...

Assume that Candlestick Company sells $100,000, 5 year, 10% bonds at $98,000. Interest is paid semiannually on April 1and and October 1 each year. Company uses straight-line amortization. Required Make the journal entry to record the issuance of bond on April 1. Make the first journal entry for payment of interest. Make adjusting entry for accrual of interest. Show the balance sheet presentation at the end of Year 1 of bond issue. Make the second journal entry for payment of...

Amazon bonds have a 9% coupon rate. Interest is paid semiannually and the bonds have a...

Amazon bonds have a 9% coupon rate. Interest is paid semiannually and the bonds have a maturity of 10 years. If the appropriate discount rate is 10% on similar bonds, what is the price of Amazon's bonds?

Sydney Company issued $1,000,000 par value 10-year bonds at 102 on January 1, 20X5, which Melbourne...

Sydney Company issued $1,000,000 par value 10-year bonds at 102 on January 1, 20X5, which Melbourne Corporation purchased. The coupon rate on the bonds is 9 percent. Interest payments are made semiannually on July 1 and January 1. On Jan 1, 20X8, Perth Company purchased $500,000 par value of the bonds from Melbourne for $492,200. Perth owns 65 percent of Sydney's voting shares. a. What amount of gain or loss will be reported in Sydney's 20X8 income statement on the...

.Dundee Company issued $1,000,000 par value 10-year bonds at 102 on January 1, 20X5, which Mega...

.Dundee Company issued $1,000,000 par value 10-year bonds at 102 on January 1, 20X5, which Mega Corporation purchased. The coupon rate on the bonds is 9 percent. Interest payments are made semiannually on July 1 and January 1. On July 1, 20X8, Perth Company purchased $500,000 par value of the bonds from Mega for $492,200. Perth owns 65 percent of Dundee's voting shares. Required: a. What amount of gain or loss will be reported in Dundee's 20X8 income statement on...

1. MAX holds bonds with a face value of 1,000,000$, an 8% interest rate (payment once...

1. MAX holds bonds with a face value of 1,000,000$, an 8% interest rate (payment once a year) and a remaining maturity of four years. Answer the following question. (1) If the market price of the bond is 1,150,000$, what is the maturity yield on the bond? (2) If the maturity yield on the bond is 10%, what is the appropriate price for this bond? (3) Assuming that you pay this ticket twice a year, put in preceding questions (1),...

Subjects