On 1 July 2022 Bombo Ltd issues $2 million in six-year bonds that pay interest every...

On 1 July 2022 Bombo Ltd issues $2 million in six-year bonds that pay interest every six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 6 per cent. Interest expense is determined using the effective-interest method.

Required

(a) Determine the issue price.

(b) Provide the journal entries at the dates below by showing relevant calculations in a table form.

(i) 1 July 2022

(ii) 30 June 2023

(iii) 30 June 2024.

Expert Solution

ekkarill92 answered 2 years ago

On 1 July 2022 Kiama Ltd issues $5 million in five-year bonds that pay interest every six months at a coupon rate of 8 per cent.

On 1 July 2022 Kiama Ltd issues $5 million in five-year bonds that pay interest every six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 10 per cent. The interest expense is calculated using the effective-interest method. Determine the issue price. (2.5 marks) Issue Price= Coupon Payment Provide the journal entries at: 1 July 2022 (2.5 marks) Type answer here 30 June 2023...

On 1 July 2015 Kruger Ltd privately issues $1 million in six-year debentures, which pay interest...

On 1 July 2015 Kruger Ltd privately issues $1 million in six-year debentures, which pay interest each six months at a coupon rate of 6 per cent per annum. At the time of issuing the securities, the market requires a rate of return of 4 per cent. Consistent with the requirements of AASB 9, the debentures are accounted for using the effective interest method. Required (a) Determine the fair value of the debentures at the time of issue (which will...

On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each...

On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. . Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = 1-1/(1+k)n/k where, k is...

on 1 july 2018 power ltd issues $10 million in five year denentures that pay interest...

on 1 july 2018 power ltd issues $10 million in five year denentures that pay interest each 6 months at coupon rate of 5%. at the time of issuing the securities the market requires a raye of return of 8%. interest expense id determined using the effective interest method. required: a) determine if the debenture is issued premium or discount? b) determine the fair value of the debentures? corporation and financial accounting

On1 july 2018 bmw ltd issues $2 million in 10 year debentures that pay interest each...

On1 july 2018 bmw ltd issues $2 million in 10 year debentures that pay interest each six month at coupon rate of 10%.at the time of issuing the securities, the market requires a rate of return of 12 per cent.interest expense is determined using the effective interest method. Formula for PV of $1in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods =1-1/(1+k)n Where k is the discount rate expressed in decimal Required:...

On 1 July 2018 BMW ltd issues $2 millions in 10 year debentures that pay interest...

On 1 July 2018 BMW ltd issues $2 millions in 10 year debentures that pay interest each six month at coupon rate of 10percent. At the time of issuing the securities, the market requires a rate of return of 12 percent.interest expenses is determined using the effective interest method. Formula for PV of $1 in n periods =1/(1+k)n Formula for PV of annuity of $1 per period for n periods =1-1/(1+k)n over k Where k is the discount rate expressed...

On 1 July 2018 Mi Ltd issues $32 000 000 in five-year debentures that pay interest...

On 1 July 2018 Mi Ltd issues $32 000 000 in five-year debentures that pay interest each six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 6 per cent. Interest expense is determined using the effective-interest method. Note: PV and Annuity tables are provided on the last page of this document REQUIRED Determine the issue price. Show the calculations in the table opening/closing values...

FYI bonds have a par value of $1,000. The bonds pay $40 in interest every six...

FYI bonds have a par value of $1,000. The bonds pay $40 in interest every six months and will mature in 10 years. a. Calculate the price if the yield to maturity on the bonds is 7, 8, and 9 percent, respectively. b. Explain the impact on price if the required rate of return decreases. c. Compute the coupon rate on the bonds. How does the relationship between the coupon rate and the yield to maturity determine how a bond's...

On 01-01-15, B issued $800,000 of 4%, 5-year term bonds. The bonds pay interest every July...

On 01-01-15, B issued $800,000 of 4%, 5-year term bonds. The bonds pay interest every July 1 and January 1. At the time B issued the bonds, similar bonds paid 4.5%. Upon issuing the bonds, B incurred and paid $7,500 of bond issuance costs. B uses the effective-interest method to amortize any bond discount or premium. B only prepares AJEs every December 31. Prepare the entries B should make on: a. 01-01-15 b. 07-01-15 c. 12-31-15 d. 01-01-16

On January 1, 2018, Vacation Destinations issues $22 million of bonds that pay interest semiannually on...

On January 1, 2018, Vacation Destinations issues $22 million of bonds that pay interest semiannually on June 30 and December 31. Portions of the bond amortization schedule appear below: (1) (2) (3) (4) (5) Date Cash Paid for Interest Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $20,569,127 6/30/2018 $880,000 $925,611 $45,611 20,614,738 12/31/2018 880,000 927,663 47,663 20,662,401 1. Were the bonds issued at face amount, a discount, or a premium? Face amount Discount Premium 2....

Question