Question

In: Accounting

On January 1, 2020, Vaughn Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds...

On January 1, 2020, Vaughn Corporation purchased 311 of the $1,000 face value, 11%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2030, and pay interest annually beginning January 1, 2021. Vaughn purchased the bonds to yield 11%. How much did Vaughn pay for the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Solutions

Expert Solution

Table values are based on:
Face Amount(311*$1,000) $                                                                        311,000
Interest Payment($311,000*11%) $                                                                          34,210
Market Interest rate per period 11.00%
Cash Flow Table Value(PV of 11% for 10 period) Amount Present Value
PV of Interest 5.88923 $                                         34,210 $201,471
PV of Principal 0.35218 $                                       311,000 $109,528
PV of Bonds Payable(Issue Price) $310,999
So the selling Price of Bond is $311,000 as the Stated Interest rate(11%) and the market Interest rate is same

Related Solutions

XYZ Corporation issued bonds on January 1, 2020 with a face value of $1,000, 10% stated...
XYZ Corporation issued bonds on January 1, 2020 with a face value of $1,000, 10% stated interest rate, with semi-annual payments, and a maturity date of December 31, 2024 (4 years). The market interest rate is 8%. Required: (Answers may be rounded to the nearest dollar) 1. Compute the market price of the bonds and the journal entry to record issuance of the bonds on January 1, 2020. 2. Record the journal entry for the first semi-annual interest payment on...
a. On January 1, 2017, Buffalo Corporation purchased 333 of the $1,000 face value, 9%, 10-year...
a. On January 1, 2017, Buffalo Corporation purchased 333 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2027, and pay interest annually beginning January 1, 2018. Buffalo purchased the bonds to yield 11%. How much did Buffalo pay for the bonds? Buffalo must pay for the bonds = ? b. Buffalo Corporation purchased a special tractor on December 31, 2017. The purchase agreement stipulated that Buffalo should pay $20,180 at the...
On January 1, Year 1 Alcorn Corporation purchased $95,000 of 9% bonds at face value. The...
On January 1, Year 1 Alcorn Corporation purchased $95,000 of 9% bonds at face value. The bonds are classified as a held-to-maturity investment. The bonds pay interest semiannually on January 1 and July 1. On December 31, Year 1, the fair value of the bonds is $98,000. Alcorn's fiscal year ends on December 31. Required: 1. Prepare the journal entries to record the acquisition of the bonds and the first two interest payments. Include any year-end adjusting entries. 2. If...
On January 1, 2020, Flanagin Corporation issued $5,000,000 face value, 8%, 10-year-bonds at $4,376,892. The price...
On January 1, 2020, Flanagin Corporation issued $5,000,000 face value, 8%, 10-year-bonds at $4,376,892. The price resulted in a 10% effective-interest rate on the bonds. Flanagin uses the effective interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1. Prepare the journal entry to record the following transactions: The issuance of bonds on January 1, 2020. Accrual of interest and amortization of the discount on December 31, 2020. (1.5 marks) The payment of...
On January 2, 2020, a calendar-year corporation sold 6% bonds with a face value of $3220000....
On January 2, 2020, a calendar-year corporation sold 6% bonds with a face value of $3220000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $2959000 to yield 8%. Using the effective-interest method of computing interest, how much should be charged to interest expense in 2020? a. $237590. b. $236720. c. $257600. d. $193200.
On January 1, 2020, North Country Co issued 10-year, 7 percent bonds with a face value...
On January 1, 2020, North Country Co issued 10-year, 7 percent bonds with a face value of $1 million. The market rate for bonds of this class at the time of issue was 8%. Interest is payable annually, with the first payment due on December 31, 2020. a. Compute the issue price of the bonds. b. Show the journal entry to record the issuance of the bonds on January 1. c. Show the journal entry to record the first interest...
On January 1, 2020, Sheridan Company purchased 11% bonds, having a maturity value of $301,000 for...
On January 1, 2020, Sheridan Company purchased 11% bonds, having a maturity value of $301,000 for $324,415.24. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheridan Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows....
On January 1, 2020, Oriole Company purchased 11% bonds, having a maturity value of $328,000 for...
On January 1, 2020, Oriole Company purchased 11% bonds, having a maturity value of $328,000 for $353,515.61. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Oriole Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows....
On January 1, 2020, Flounder Company purchased 11% bonds, having a maturity value of $320,000 for...
On January 1, 2020, Flounder Company purchased 11% bonds, having a maturity value of $320,000 for $344,893.28. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Flounder Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows....
On January 1, 2020, Sheffield Company purchased 11% bonds, having a maturity value of $289,000 for...
On January 1, 2020, Sheffield Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheffield Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT