Sandhill Co. issued 8%, 9-year, $2,618,600 par value bonds that pay interest semiannually on October 1...

Sandhill Co. issued 8%, 9-year, $2,618,600 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2017, and are issued on that date. The discount rate of interest for such bonds on April 1, 2017, is 8%.

What cash proceeds did Sandhill receive from issuance of the bonds?

Expert Solution


CALCULATION OF PRESENT VALUE OF THE BOND IF THE INTEREST PAID SEMI ANNUALLY

Step 1 : Calculation of Annual Coupon Payments
Par value of the bond issued is =			$26,18,600
Annual Coupon %			8.00%
Annual Coupon Amount			$2,09,488.00
Semi Annual Coupon Amount			$1,04,744.00

Step 2: Calculate number of years to Maturity
Number of years to maturity = 9 years
Interest is paid semi annyally so total period = 9 Years * 2 = 18 Periods

Step 3 : Caclulation of Current Market Price (intrinsic value) of the bonds

Market rate of interest or Yield to Maturity or Required Return = 8%
Bonds interest is paid semi annualy means so discounting factor = 8 % /2= 4 %

PVF = 1 / Discount rate = 1/ 1.04
Result of above will again divide by 1.04 , repeat this lat period

Period	Interest	Amount (In Million)	PVF @ 4%	PresentValue
1	Interest	$1,04,744.00	0.9615	$1,00,715.38
2	Interest	$1,04,744.00	0.9246	$96,841.72
3	Interest	$1,04,744.00	0.8890	$93,117.03
4	Interest	$1,04,744.00	0.8548	$89,535.61
5	Interest	$1,04,744.00	0.8219	$86,091.93
6	Interest	$1,04,744.00	0.7903	$82,780.70
7	Interest	$1,04,744.00	0.7599	$79,596.83
8	Interest	$1,04,744.00	0.7307	$76,535.41
9	Interest	$1,04,744.00	0.7026	$73,591.75
10	Interest	$1,04,744.00	0.6756	$70,761.29
11	Interest	$1,04,744.00	0.6496	$68,039.71
12	Interest	$1,04,744.00	0.6246	$65,422.79
13	Interest	$1,04,744.00	0.6006	$62,906.53
14	Interest	$1,04,744.00	0.5775	$60,487.05
15	Interest	$1,04,744.00	0.5553	$58,160.63
16	Interest	$1,04,744.00	0.5339	$55,923.68
17	Interest	$1,04,744.00	0.5134	$53,772.77
18	Interest	$1,04,744.00	0.4936	$51,704.58
18	Bond Principal Value	$26,18,600.00	0.4936	$12,92,614.60
	Total			$26,18,600.00

	Current Bonds Price =			$26,18,600

Cash Proceeds from the issue og bonds =			$26,18,600


	Answer =	$26,18,600

ekkarill92 answered 1 year ago

Jimenez Enterprises issued 9%, 8-year, $2,689,000 par value bonds that pay interest semiannually on October 1 and April 1.

Jimenez Enterprises issued 9%, 8-year, $2,689,000 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2014, and are issued on that date. The discount rate of interest for such bonds on April 1, 2014, is 10%.What cash proceeds did Jimenez receive from the issuance of the bonds?

A company issued 9%, 15-year bonds with a par value of $560,000 that pay interest semiannually....

A company issued 9%, 15-year bonds with a par value of $560,000 that pay interest semiannually. The market rate on the date of issuance was 9%. The journal entry to record each semiannual interest payment is: Multiple Choice Debit Bond Interest Expense $510,000; credit Cash $510,000. No entry is needed, since no interest is paid until the bond is due. Debit Bond Interest Expense $50,400; credit Cash $50,400. Debit Bond Interest Expense $25,200; credit Cash $25,200. Debit Bond Interest Payable...

A company issued 9%, 15-year bonds with a par value of $650,000 that pay interest semiannually....

A company issued 9%, 15-year bonds with a par value of $650,000 that pay interest semiannually. The market rate on the date of issuance was 9%. The journal entry to record each semiannual interest payment is: Multiple Choice Debit Bond Interest Expense $29,250; credit Cash $29,250. Debit Bond Interest Payable $43,333; credit Cash $43,333. Debit Bond Interest Expense $600,000; credit Cash $600,000. No entry is needed, since no interest is paid until the bond is due. Debit Bond Interest Expense...

A company issued 8%, 15-year bonds with a par value of $580,000 that pay interest semiannually....

A company issued 8%, 15-year bonds with a par value of $580,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is: Multiple Choice Debit Bond Interest Expense $46,400; credit Cash $46,400. Debit Bond Interest Expense $530,000; credit Cash $530,000. Debit Bond Interest Expense $23,200; credit Cash $23,200. No entry is needed, since no interest is paid until the bond is due. Debit Bond Interest Payable...

Gleason Enterprises issued 12%, 7-year, $2,630,000 par value bonds that pay interest semiannually on October 1...

Gleason Enterprises issued 12%, 7-year, $2,630,000 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2020, and are issued on that date. The discount rate of interest for such bonds on April 1, 2020, is 14%. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What cash proceeds did Gleason receive from issuance of the bonds? (Round answer...

Spiller Corp. plans to issue 6%, 9-year, $550,000 par value bonds payable that pay interest semiannually...

Spiller Corp. plans to issue 6%, 9-year, $550,000 par value bonds payable that pay interest semiannually on June 30 and December 31. The bonds are dated December 31, 2019, and are issued on that date. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places and final answers to nearest whole dollar.) If the market rate of interest for the bonds is...

On January 1, 2014, Apple Smith Co. issued $200,000, 9%, four-year bonds. Interest is paid semiannually...

On January 1, 2014, Apple Smith Co. issued $200,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $187,330.87 to yield an annual return of 11%. Required: 1. Prepare an amortization schedule that determines interest at the effective interest rate for each period. 2. Prepare an amortization schedule by the straight-line method for each of the eight interest payment periods. 3. Prepare the journal entries to record interest expense on June...

Adonis Corporation issued 10-year, 11% bonds with a par value of $270,000. Interest is paid semiannually....

Adonis Corporation issued 10-year, 11% bonds with a par value of $270,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adonis received $286,827 in cash proceeds. Which of the following statements is true? a) Adonis must pay $286,827 at maturity and no interest payments. b) Adonis must pay $270,000 at maturity and no interest payments. c) Adonis must pay $270,000 at maturity plus 20 interest payments of $13,500 each. d) Adonis must pay $286,827 at...

Adonis Corporation issued 10-year, 7% bonds with a par value of $130,000. Interest is paid semiannually....

Adonis Corporation issued 10-year, 7% bonds with a par value of $130,000. Interest is paid semiannually. The market rate on the issue date was 6%. Adonis received $139,674 in cash proceeds. Which of the following statements is true? Adonis must pay $139,674 at maturity plus 20 interest payments of $4,550 each. Adonis must pay $130,000 at maturity plus 20 interest payments of $4,550 each. Adonis must pay $130,000 at maturity plus 20 interest payments of $3,900 each. Adonis must pay...

Question 3 A company issued 8%, 15-year bonds with a par value of $470,000 that pay...

Question 3 A company issued 8%, 15-year bonds with a par value of $470,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is: Multiple Choice Debit Bond Interest Expense $37,600; credit Cash $37,600. Debit Bond Interest Expense $18,800; credit Cash $18,800. Debit Bond Interest Payable $31,333; credit Cash $31,333. No entry is needed, since no interest is paid until the bond is due. Debit Bond...

Question