Seaside Corp. issued 10%, 5-year bonds with a face amount of $50,000 on January 1, 2020....

Seaside Corp. issued 10%, 5-year bonds with a face amount of $50,000 on January 1, 2020. The market interest rate for bonds of similar risk and maturity is 12%. Interest is paid semiannually on June 30 and December 31. Seaside uses the effective interest method to account for these bonds. What is the issue price of these bonds on January 1, 2020?

Group of answer choices

$50,000

$83,920

$53,605

$46,320

Solutions

Expert Solution

Answer:

Option D: $ 46,320

Explanation:

The value of bond = Present value of face amount + present value of interest

= [$ 50,000 * PVF (6%, 10 years)] + [2,500 * PVAF (6%, 10 years)]

= (50,000 * 0.5584) + (2,500 * 7.3601)

= 27,920 + 18,400

= $ 46,320

Note 1: PVF (6%, 10 years)

Note 2: PVAF (6%, 10 years)

Hence,

Option 'D' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On January 1, 2020, Linen Corp. issued $ 540,000 (face value), 10% annual interest, ten-year bonds...

On January 1, 2020, Linen Corp. issued $ 540,000 (face value), 10% annual interest, ten-year bonds at 97. The bonds are callable at 103. Linen has recorded amortization of the bond premium by the straight-line method. On December 31, 2025, Linen repurchased $ 200,000 of the bonds in the open market at 103. Bond interest expense and premium amortization have not been recorded for 2025. Prepare the journal entries for December 31, 2025.

On January 1, 2019, Hawthorne Corporation issued for $155,989, 5-year bonds with a face amount of...

On January 1, 2019, Hawthorne Corporation issued for $155,989, 5-year bonds with a face amount of $150,000 and a stated (or coupon) rate of 9%. The bonds pay interest annually and have an effective interest rate of 8%. Assume Hawthorne uses the effective interest rate method. Required: 1. Prepare the entry to record the sale of the bonds. 2. Calculate the amount of the interest payments for the bonds. 3. Prepare the amortization table through 2020. 4. Prepare the journal...

On October 1, 2016, Indigo Corp. issued $960,000, 5%, 10-year bonds at face value. The bonds...

On October 1, 2016, Indigo Corp. issued $960,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2016, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. Prepare the adjusting entry to record the accrual of interest on December 31, 2016. Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2016. Prepare the journal...

On October 1, 2021, Sarasota Corp. issued $888,000, 5%, 10-year bonds at face value. The bonds...

On October 1, 2021, Sarasota Corp. issued $888,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Oct. 1, 2021 enter an account title for the journal entry on...

On October 1, 2021, Ayayai Corp. issued $720,000, 5%, 10-year bonds at face value. The bonds...

On October 1, 2021, Ayayai Corp. issued $720,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Oct. 1, 2021 enter an account title for the journal entry on...

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of...

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2032. The bonds were issued for $$3,408,818 to yield 10%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is: (show computations)

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of...

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2032. The bonds were issued for $$3,408,818 to yield 10%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. Interest Expense for 2023 is: Submit the assignment in Excel using one page

1. On January 1, 2020, North Country Co issued 10-year, 7 percent bonds with a face...

1. 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...

On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000,...

On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2032. The bonds were issued for $$3,408,818 to yield 10%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is:

Appling Enterprises issued 10% bonds with a face amount of $540,000 on January 1, 2018. The...

Appling Enterprises issued 10% bonds with a face amount of $540,000 on January 1, 2018. The bonds sold for $496,675 and mature in 2037 (20 years). For bonds of similar risk and maturity the market yield was 11%. Interest is paid semiannually on June 30 and December 31. Appling determines interest expense at the effective rate. Appling elected the option to report these bonds at their fair value. The fair values of the bonds at the end of each quarter...

Subjects