A company issues $680,000 of 5% bonds, due in 10 years, with interest payable semiannually on...

A company issues $680,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year.

Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:

1. The market interest rate is 5% and the bonds issue at face amount.

2. The market interest rate is 4% and the bonds issue at a premium

3. The market interest rate is 6% and the bonds issue at a discount

Solutions

Expert Solution

Case-1
Stated rate of interest:			5%
Market rate of interest:			5%
Par value of bonds			680,000
Issue price			680,000
Semi Annual Interest			17000
(680,0005%6/12)
Discount/ Premium on issue			Nil

Amortization Table
Date	Cash	Interest	Discount/Premium	Unamortized	Carrying Value
	Interest	Expense	Amortized	Discount/Premium	Of bonds
Jan 1Yr1				0	680,000
June30 Yr1	17000	17000	0	0	680,000
Dec31 Yr1	17000	17000	0	0	680,000
June 30 Yr2	17000	17000	0	0	680,000

Case-2
Stated rate of interest:			5%
Market rate of interest:			4%
Par value of bonds			680,000
Semi Annual Interest			17000
(680,0005%6/12)
PV factor at 4% for maturity			0.673
Annuity factor for interest			16.351
Present value of maturity			457640
Present value of Interest			277,974
Issue price			735,614
Premium on bonds payable			55,614

Amortization Table
Date	Cash	Interest	Premium	Unamortized	Carrying Value
	Interest	Expense	Amortized	Premium	Of bonds
Jan 1Yr1				55614	735,614
June30 Yr1	17000	14712	2288	53326	733,326
Dec31 Yr1	17000	14667	2333	50993	730,993
June 30 Yr2	17000	14620	2380	48613	728,613


Case-3
Stated rate of interest:			5%
Market rate of interest:			6%
Par value of bonds			680,000
Semi Annual Interest			17000
(680,0005%6/12)
PV factor at 4% for maturity			0.554
Annuity factor for interest			14.877
Present value of maturity			376720
Present value of Interest			252,909
Issue price			629,629
Discount on bonds payable			50,371

Amortization Table
Date	Cash	Interest	Discount	Unamortized	Carrying Value
	Interest	Expense	Amortized	Discount	Of bonds
Jan 1Yr1				50371	629,629
June 30 Yr1	17000	18889	1889	48482	631,518
Dec31 Yr1	17000	18946	1946	46536	633,464
June 30 Yr2	17000	19004	2004	44532	635,468

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Christmas Anytime issues $650,000 of 5% bonds, due in 10 years, with interest payable semiannually on...

Christmas Anytime issues $650,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: 5. Required information Required: 1. The market interest rate is 5% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: Required: 1. The market interest rate is 5% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: 2. The market interest rate is 6% and the bonds issue at a discount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually...

Coney Island Entertainment issues $1,500,000 of 5% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: 3. The market interest rate is 4% and the bonds issue at a premium. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest...

Coney Island Entertainment issues $1,200,000 of 6% bonds, due in 10 years, with interest payable semiannually...

Coney Island Entertainment issues $1,200,000 of 6% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate is 7% and the bonds issue at a discount. (FV of $1, PV of $1, FVA of $1, and PVA of $1 Issued price? Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/18 06/30/18 $36,000 12/31/18 36,000 3. The market interest rate is 5% and the bonds issue at...

1-Novak Corporation issues $530,000 of 9% bonds, due in 10 years, with interest payable semiannually. At...

1-Novak Corporation issues $530,000 of 9% bonds, due in 10 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. Issue price of the bonds $ 2-The Sheffield Company issued $320,000 of 8% bonds on January 1, 2017. The bonds are due January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Sheffield’s journal entries...

Coney Island Entertainment issues $1,500,000 of 6% bonds, due in 10 years, with interest payable semiannually...

Coney Island Entertainment issues $1,500,000 of 6% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: Required: 1. The market interest rate is 6% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not...

Coronado Corporation issues $410,000 of 9% bonds, due in 9 years, with interest payable semiannually. At...

Coronado Corporation issues $410,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Issue price of the bonds

Christmas Anytime issues $810,000 of 7% bonds, due in 20 years, with interest payable semiannually on...

Christmas Anytime issues $810,000 of 7% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first three rows of an amortization schedule when: Required: 1. The market interest rate is 7% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round...

Wildhorse Corporation issues $560,000 of 9% bonds, due in 9 years, with interest payable semiannually. At...

Wildhorse Corporation issues $560,000 of 9% bonds, due in 9 years, with interest payable semiannually. At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Issue price of the bonds

Subjects