Question
In: Accounting
On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 10% bonds dated
January 1, 2018, with a face amount of $37 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the
tables provided.)
Required:
Determine the price of the bonds at January 1, 2018. (Enter
your answer in whole dollars.)
Solutions
Expert Solution
|
Bonds issue price is calculated by ADDING the: |
||||
|
Discounted face value of bonds payable at market rate of interest, and |
||||
|
Discounted Interest payments amount (during the lifetime) at market rate of interest. |
|
Annual Rate |
Applicable rate |
Face Value |
$ 37,000,000.00 |
||
|
Market Rate |
12.00% |
6.00% |
Term (in years) |
10 |
|
|
Coupon Rate |
10.00% |
5.00% |
Total no. of interest payments |
20 |
|
Calculation of Issue price of Bond |
||||||||
|
Bond Face Value |
Market Interest rate (applicable for period/term) |
|||||||
|
PV of |
$ 37,000,000.00 |
at |
6.0% |
Interest rate for |
20 |
term payments |
||
|
PV of $1 |
0.31180473 |
|||||||
|
PV of |
$ 37,000,000.00 |
= |
$ 37,000,000.00 |
x |
0.311804727 |
= |
$ 11,536,774.895 |
A |
|
Interest payable per term |
at |
5.0% |
on |
$ 37,000,000.00 |
||||
|
Interest payable per term |
$ 1,850,000.00 |
|||||||
|
PVAF of 1$ |
for |
6.0% |
Interest rate for |
20 |
term payments |
|||
|
PVAF of 1$ |
11.46992122 |
|||||||
|
PV of Interest payments |
= |
$ 1,850,000.00 |
x |
11.46992122 |
= |
$ 21,219,354.254 |
B |
|
|
Bond Value (A+B) |
$ 32,756,129. |
|||||||
Answer
Issue price of Bond =$ 32,756,129
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 10% bonds dated
January 1, 2018, with a face amount of $20 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31.
Required:
1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record the bond issuance by
Bishop on January 1, 2018.
3. Prepare the...
On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 10% bonds dated
January 1, 2018, with a face amount of $19.6 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided. Round your intermediate calculations to...
On January 1, 2018, Bishop Company issued 8% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 8% bonds dated January
1, 2018, with a face amount of $20.2 million. The bonds mature in
2027 (10 years). For bonds of similar risk and maturity, the market
yield is 10%. Interest is paid semiannually on June 30 and December
31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD
of $1) (Use appropriate factor(s) from the tables provided.
Round your intermediate calculations to...
On January 1, 2018, Bishop Company issued 8% bonds dated January 1, 2018, with a face...
On January 1, 2018, Bishop Company issued 8% bonds dated January
1, 2018, with a face amount of $20.1 million. The bonds mature in
2027 (10 years). For bonds of similar risk and maturity, the market
yield is 10%. Interest is paid semiannually on June 30 and December
31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD
of $1) (Use appropriate factor(s) from the tables provided.
Round your intermediate calculations to...
On January 1, 2021, Bishop Company issued 10% bonds dated January 1, 2021, with a face...
On January 1, 2021, Bishop Company issued 10% bonds dated
January 1, 2021, with a face amount of $19.7 million. The bonds
mature in 2030 (10 years). For bonds of similar risk and maturity,
the market yield is 12%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1) (Use appropriate factor(s) from the tables
provided. Round your intermediate calculations to...
On January 1, 2017, Bishop Company issued 12% bonds dated January 1, 2017, with a face...
On January 1, 2017, Bishop Company issued 12% bonds dated
January 1, 2017, with a face amount of $20 million. The bonds
mature in 10 years. For bonds of similar risk and maturity, the
market yield is 10%. Interest is paid semiannually on June 30 and
December 31.
1. Determine the price of the bonds at January 1,
2017
2. Prepare the journal entry to record the bond issuance
by Bishop on January 1, 2017.
3. Prepare the journal entry...
On January 1, 2018, King Co. issued 10% bonds dated January 1, 2018, with a face...
On January 1, 2018, King Co. issued 10% bonds dated January 1,
2018, with a face amount of $19.2 million. The bonds mature in 2027
(10 years). For bonds of similar risk and maturity, the market
yield is 12%. Interest is paid semiannually on June 30 and December
31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD
of $1) (Use appropriate factor(s) from the tables provided. Round
your intermediate calculations to...
On January 1, 2018, Entity A issued 8% bonds dated January 1, 2018, with a face...
On January 1, 2018, Entity A issued 8% bonds dated January 1,
2018, with a face amount of $10 million. The bonds mature in 2022
(5 years). For bonds of similar risk and maturity, the market yield
is 10%. Interest is paid semiannually on June 30 and December
31.
A. What was the issue price of the bonds?
B. Prepare the journal entry to record the bond issuance.
C. Prepare the journal entry to record interest on June 30,
2018,...
On January 1, 2018, Entity A issued 8% bonds dated January 1, 2018, with a face...
On January 1, 2018, Entity A issued 8% bonds dated January 1,
2018, with a face amount of $10 million. The bonds mature in 2022
(5 years). For bonds of similar risk and maturity, the market yield
is 10%. Interest is paid semiannually on June 30 and December 31.
A. Prepare a partial balance sheet showing the bonds at December
31, assuming that Entity A had used the effective interest method
from the inception. B. Why might a company utilize...
On January 1, 2018, Mania Enterprises issued 12% bonds dated January 1, 2018, with a face...
On January 1, 2018, Mania Enterprises issued 12% bonds dated
January 1, 2018, with a face amount of $20.1 million. The bonds
mature in 2027 (10 years). For bonds of similar risk and maturity,
the market yield is 10%. Interest is paid semiannually on June 30
and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of
$1 and PVAD of $1)
Required:
1. Determine the price of the bonds at January 1,
2018....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
- #Python: A palindrome is a sequence of characters that reads the same backwards as forwards. For...
- Explain an example in which a variable has two different addresses at different places in a...
- Hadley, a thirty-five-year-old physician, has worked at Princeton Plainsboro Hospital for six years. She recently received...
ADVERTISEMENT