Question
In: Accounting
On January 1 st 2012, Everhart Corporation, a calendar year company issues $100,000, 5%, 5-year bonds...
| On January 1 st 2012, Everhart Corporation, a calendar year company | |||||
| issues $100,000, 5%, 5-year bonds dated January 1, 2012. The bond pays | |||||
| interest semiannually on January 1 and July 1 . The bonds are issued | |||||
| to yield 6%. | |||||
Solutions
Expert Solution
Answer:- The present value of bond investment = $96162.
Explanation-Calculation of selling price of bond at issuance=
B0 =C/2 {1-(1+r/2)-2t}/ r/2 +F/(1+r/2)-2t
Where:-
Bo = Bond price
C= Coupon payment
r = Interest Rate
F= Face value
t = Years/Periods
Since the interest is paid semi-annually the bond interest rate per period is 2.5% (= 5%/ 2), the market interest rate is 3% (= 6%/ 2) and number of time periods are 10 (= 2*5). Hence, the price of the bond is calculated as the present value of all future cash flows as shown below:-
Price of Bond =2.5%*$100000*{1-(1+3%)-10/3%} +$100000/(1+3%)10
=($2500*8.5302)+ ($100000*0.7441)
= $21752+$74410
=$96162
ekkarill92 answered 2 years agoRelated Solutions
. Collins Company issues term bonds with a face value of $100,000 on January 1, Year...
. Collins Company issues term bonds with a face value of
$100,000 on January 1, Year One. The bonds have an annual stated
rate of interest of 4 percent and a life of ten years. They pay
interest semiannually on June 30 and December 31. The bonds were
issued to yield an effective annual interest rate of 6 percent. The
present value of $1 in 10 periods at a 4 percent interest rate is
$0.67556, in 10 periods at 6...
Tano Company issues bonds with a par value of $100,000 on January 1, 2019. The bonds’...
Tano Company issues bonds with a par value of $100,000 on
January 1, 2019. The bonds’ annual contract rate is 8%, and
interest is paid semiannually on June 30 and December 31. The bonds
mature in three years. The annual market rate at the date of
issuance is 10%, and the bonds are sold for $94,923.
1. What is the amount of the discount on these bonds at
issuance?
2. How much total bond interest expense will be recognized over...
The Mesino Corporation issues $80,000, 5%, 5-year bonds on January 1, for $83,200. Interest is paid...
The Mesino Corporation issues $80,000, 5%, 5-year bonds on
January 1, for $83,200. Interest is paid semiannually on January 1
and July 1. If Mesino uses the straight-line method of amortization
of bond premium, the amount of bond interest expense to be
recognized on July 1 is
a.
$2,000
b.
$4,000
c.
$1,680
d.
$3,360
Coronado Company issues $26000000, 5%, 5-year bonds dated January 1, 2017 on January 1, 2017. The...
Coronado Company issues $26000000, 5%, 5-year bonds dated
January 1, 2017 on January 1, 2017. The bonds pay interest
semiannually on June 30 and December 31. The bonds are issued to
yield 4%. What are the proceeds from the bond issue?
Answers given:
$27156209
$26000000
$27167784
$27160279
On January 1, 2012, Corporation A issued $18,000,000 of 10% ten-year bonds at 103. The bonds...
On January 1, 2012, Corporation A issued $18,000,000 of 10%
ten-year bonds at 103. The bonds are callable at the option of
Corporation A at 105. Corporation A has recorded amortization of
the bond premium on the straight line method.
On December 31, 2018, when the fair value of the bonds was 96,
Corporation A repurchased $4,000,000 if the bonds in the open
market at 96. Corporation A has recorded interest and amortization
for 2018.
What amount of gain/loss(ignoring income...
On January 1, Hurley Corporation issues $2,500,000, 5-year, 12% bonds at 96 with interest payable on...
On January 1, Hurley Corporation issues $2,500,000, 5-year, 12%
bonds at 96 with
interest payable on July 1 and January 1. The entry on December 31
to record accrued
bond interest and the amortization of bond discount using the
straight-line method will
include a
debit to Interest Expense, $150,000.
debit to Interest Expense, $300,000.
credit to Discount on Bonds Payable, $10,000.
credit to Discount on Bonds Payable, $20,000.
A corporation issues $1,000,000,000, 10%, 5-year bonds on
January 1, 2014, for...
On January 1, 2019 Lightfoot Corporation issues 10%, 5-year bonds with a face value of $275,000...
On January 1, 2019 Lightfoot Corporation issues 10%, 5-year
bonds with a face value of $275,000 when the effective interest
rate is 9%. Interest is to be paid semiannually on June 30 and
December 31. Lightfoot uses the effective interest method to
amortize the premium on June 30, 2019.
Prepare the journal entry to record the first interest payment
on June 30, 2019.
1. On January 1, 2019, Always Corporation issues $3,100,000, 5−year, 12% bonds for $3,010,000. Interest is...
1. On January 1, 2019, Always Corporation issues $3,100,000,
5−year, 12% bonds for $3,010,000. Interest is paid semiannually
on January 1 and July 1. Always Corporation uses the straight−line
method of amortization. The company's fiscal year ends on December
31. The amount of discount amortized on July 1, 2019 is:
2. Williamson Company declared and distributed a 10% stock
dividend when it had 900,000 shares of $1 par value common stock
outstanding. The market price per share of common stock...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2020, for...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year
bonds due December 31, 2020, for $103,604.79 minus debt issuance
costs of $3,000. The bonds carry a stated rate of interest of 13%
payable annually on December 31 and were issued to yield 12%. The
company uses the effective interest method of amortization to
amortize any discounts or premiums and the straight-line method to
amortize the debt issuance costs.
Required:
Prepare the journal entries to
record the issuance of the...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2020, for...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year
bonds due December 31, 2020, for $103,604.79 minus debt issuance
costs of $3,000. The bonds carry a stated rate of interest of 13%
payable annually on December 31 and were issued to yield 12%. The
company uses the effective interest method of amortization to
amortize any discounts or premiums and the straight-line method to
amortize the debt issuance costs.
Required: Prepare the journal entries to record the issuance of
the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- An investment project costs $20,100 and has annual cash flows of $4,400 for six years. ...
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
ADVERTISEMENT