Several years ago, Timmons Company issued bonds with a face value of $1,000,000. It redeemed half...

Several years ago, Timmons Company issued bonds with a face value of $1,000,000. It redeemed half of the bonds at 99 on January 1, 2020. At that time, the total unamortized premium on the bond issue was $30,000.

a) What is the reacquisition price of the bonds redeemed?

b) What is the carrying value of the bonds redeemed?

c) What is the gain or loss on redemption?

d) Prepare the entry to record the redemption of the bonds.

e) What effect will the redemption have on the income statement for the year?

Expert Solution

ekkarill92 answered 1 year ago

Several years ago, Castles in the sand Inc. issued bonds at face value of 1,000 at...

Several years ago, Castles in the sand Inc. issued bonds at face value of 1,000 at a yield to maturity of 8.6%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15%. What is the price of the bond now? (Assume semi-annual coupon payments) Suppose that investors believe that Castles can make good on the promise coupon payments but that...

Larry Company issued 10 year, 6% bonds with a face value of $1,000,000. The bonds were...

Larry Company issued 10 year, 6% bonds with a face value of $1,000,000. The bonds were sold to yield 7%. Interest is payable semi-annually on January 1 and July 1. Effective rate amoritization is to be used. 1. What is the issue price of the bonds? 2. Prepare an amortization table for the entire bond term. Table should be properly labeled. Amounts should be rounded to the nearest dollar. 3. Record the bond issuance on 1/1/18 Accounts Debit Credit 4....

Suppose a US company issued 10-year bonds 5 years ago with a face value of $1,000...

Suppose a US company issued 10-year bonds 5 years ago with a face value of $1,000 and an annual coupon rate of 6%. The coupons are paid semi-annually and the bonds are currently trading in the market at a price of $1,089.83. The company is considering whether to call the bonds and issue new 5- year bonds at a par value of $1,000. Based on this information, answer the following four questions. (i) What is the yield to maturity on...

Ten years ago, The Romulus Company issued bonds that pay annual coupons, have a face value...

Ten years ago, The Romulus Company issued bonds that pay annual coupons, have a face value of $1,000, have a coupon rate of 10.44%, and were scheduled to mature 22 years after being issued. One year ago, you bought one of those bonds for $1,034.68. The bond just paid a coupon. If the percentage return on your bond was 3.37% over the past year (from 1 year ago to today), what is the price of the bond today? Now in...

15. Marvin’s Interiors issued 9-year bonds 2 years ago. The bonds have a face value of...

15. Marvin’s Interiors issued 9-year bonds 2 years ago. The bonds have a face value of $1,400, a 9.0 percent, semiannual coupon, and a current market price of $1,189. What is the pre-tax cost of debt? 13.97 percent 13.02 percent 12.27 percent 13.53 percent 16. Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 8.6 percent. The company also has 3.1 million shares of common stock outstanding. The stock has a beta of...

sixteen years ago, national distributors issued 30-year bonds that have a face value of $1000 and...

sixteen years ago, national distributors issued 30-year bonds that have a face value of $1000 and a coupon rate of 8.55%. the bond pays coupons semiannually. the required return in the market is 7.48%. 1. What is the price today? 2. What is the formula you used 3. what is the value for the number of periods (t) used in the equation? 4. What is the value for interest rate used in the equation?

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000...

________ 16. Seven years ago, Peterborough Trucking issued 15-year bonds with a face value of $1,000 each. Today, the market rate of return on these bonds is 7.9 percent and the market price is $984.20 The bonds pay interest semi-annually. What is the coupon rate? a. 6.67 percent b. 6.85 percent c. 7.63 percent d. 7.76 percent ________ 18. Today, you paid a total of $1,108.16 to purchase a $1,000 bond. The bond has a 6...

A corporate bond with a face value of $100,000 was issued six years ago and there...

A corporate bond with a face value of $100,000 was issued six years ago and there are four years remaining until maturity. The bond pays semi-annual coupon payments of $4500, the coupon rate is 9% pa paid twice yearly and rates in the marketplace are 9.4% pa compounded semi-annually. What is the value of the bond today? a. $98,975.05 b. $98,196.97 c. $100,000.00 d. $98,691.54 e. $84,263.76

A government bond with a face value of $1,000 was issued eight years ago and there...

A government bond with a face value of $1,000 was issued eight years ago and there are seven years remaining until maturity. The bond pays annual coupon payments of $90, the coupon rate is 9% pa and rates in the marketplace are 9.5% p.a. What is the value of the bond today? a. $975.25 b. $1,427.50 c. $1,000.00 d. $972.83 e. $962.14

A corporate bond was issued a few years ago at face value of $1,000 with a...

A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid coupons. Now with 12 years left until the maturity, the company has run into hard times and the yield to maturity has increased to 15%. 1) What is the bond price now? 2) Suppose the company defer the loss to future and will make good on the promised coupon payments. However, the deferred loss will finally drive the...

Question