Question
In: Accounting
Use the following information to answer questions 7. On January 1, 2020, Beck Co....
Use the following information to answer questions 7.
On January 1, 2020, Beck Co. issued (sold) ten-year bonds with a face amount of $3,000,000 and a stated
interest rate of 10%. Interest is payable semi-annually on January1 and July 1st of each year.
The bonds were priced to yield 8% (market interest rate).
Present value factors are as follows:
At 4% At 8% At 10%
Present value of $1 for 10 periods 0.6756 0.4630 0.3860
Present value of $1 for 20 periods 0.4564 0.2145 0.1486
Present value of an ordinary annuity of $1 for 10 periods 8.1109 6.7100 6.1450
Present value of an ordinary annuity of $1 for 20 periods 13.590 9.8181 8.5136
7- The total issue price of the bonds was
a. $3,000,000.
b. $3,402,,000.
c. $2,760,000.
d. $3,407,700.
e. None of the above
Solutions
Expert Solution
Correct answer------------(d) $3,407,700
Working
| Bonds issue price is calculated by ADDING the: |
| Discounted face value of bonds payable at market rate of interest, and |
| Discounted Interest payments amount (during the lifetime) at market rate of interest. |
.
| Annual Rate | Applicable rate | Face Value | $ 3,000,000 | ||
| Market Rate | 8.00% | 4.00% | Term (in years) | 10 | |
| Coupon Rate | 10.00% | 5.00% | Total no. of interest payments | 20 |
..
| Calculation of Issue price of Bond | ||||||||
| Bond Face Value | Market Interest rate (applicable for period/term) | |||||||
| PV of | $ 3,000,000 | at | 4.00% | Interest rate for | 20 | term payments | ||
| PV of $1 | 0.45639 | |||||||
| PV of | $ 3,000,000 | = | $ 3,000,000 | x | 0.45640 | = | $ 1,369,200 | A |
| Interest payable per term | at | 5.00% | on | $ 3,000,000 | ||||
| Interest payable per term | $ 150,000 | |||||||
| PVAF of 1$ | for | 4.00% | Interest rate for | 20 | term payments | |||
| PVAF of 1$ | 13.59033 | |||||||
| PV of Interest payments | = | $ 150,000 | x | 13.59000 | = | $ 2,038,500 | B | |
| Bond Value (A+B) | $ 3,407,700 |
ekkarill92 answered 1 year agoRelated Solutions
Use the following information to answer questions 7-11 [The following information applies to the questions displayed...
Use the following information to answer questions 7-11
[The following information applies to the questions
displayed below.]
The following information is available for Lock-Tite Company,
which produces special-order security products and uses a job order
costing system.
April 30
May 31
Inventories
Raw materials
$
33,000
$
58,000
Work in process
9,600
18,200
Finished goods
59,000
33,400
Activities and information for May
Raw materials purchases (paid
with cash)
174,000
Factory payroll (paid with
cash)
330,000
Factory overhead
Indirect
materials...
Use the following information to answer questions 1-7 Consider the following abbreviated financial statements for Boathead...
Use the following information to answer questions 1-7 Consider
the following abbreviated financial statements for Boathead
Enterprises: BOATHEAD ENTERPRISES 2014 and 2015 Partial Balance
Sheets Assets Liabilities and Owners’ Equity 2014 2015 2014 2015
Current assets $ 946 $ 1,008 Current liabilities $ 385 $ 404 Net
fixed assets 3,907 4,600 Long-term debt 2,029 2,197 Equity 2,439
3,007 BOATHEAD ENTERPRISES 2015 Select Income Statement Info Sales
$ 12,340 Costs 5,920 Depreciation 1,050 Interest paid 190 The tax
rate is 35%....
Use the following information to answer questions 1-7 Consider the following abbreviated financial statements for Boathead...
Use the following information to answer
questions 1-7
Consider the following abbreviated financial statements for
Boathead Enterprises:
BOATHEAD ENTERPRISES
2014 and 2015 Partial Balance Sheets
Assets
Liabilities and Owners’ Equity
2014
2015
2014 2015
Current assets
$ 946
$ 1,008
Current liabilities
$ 385
$ 404
Net fixed assets
3,907
4,600
Long-term debt
2,029
2,197
Equity
2,439
3,007
BOATHEAD ENTERPRISES
2015 Select Income Statement Info
Sales
$ 12,340
Costs
5,920
Depreciation
1,050
Interest paid
190
The tax rate is 35%....
Use the following information to answer questions 1-7 Consider a firm that daily rents machinery for...
Use the following information to answer questions
1-7
Consider a firm that daily rents machinery for the cost
of $1000 and employs workers at the cost of $100 for a full day of
work. The following table describes the production function of the
firm. Fill the table such that you can make some production
decisions for this firm.
Units of Labor
Units of Production
Fixed Costs
Variable Costs
Total Costs
Average Variable Costs
Average Total Costs
Marginal Cost
1
11.00...
Use the following information to answer Questions 6 and 7. The 1-, 2-, 3-, and 4-year...
Use the following information to answer Questions 6 and 7.
The 1-, 2-, 3-, and 4-year oil forward prices are $60, $58.35,
$57.40, and $55 per barrel, respectively. Your firm is thinking
about starting up an offshore drilling station and needs to
forecast revenue over the next 4 years. Assume the risk-free rate
is 5.25% each year and initial costs are $150,000,000.
6. (1 point) If your firm expects to extract 1,100,000 barrels of
oil per year and each barrel...
QUESTION 7 Use the following information to answer the next two questions: (Question 1 of 2)...
QUESTION 7
Use the following information to answer the next two
questions: (Question 1 of 2)
Higgins Company purchased specialized equipment on July 1, 2019,
that cost $300,000, has a residual value of $40,000, and a useful
life of four years.
The amount of depreciation expense for 2020,
under the double declining balance method is:
A.
$112,500.
B.
None of the above
C.
$97,500.
D.
$75,000.
E.
$125,000.
2 points
QUESTION 7
B
Use the following information to answer...
Use the following information about HamsterFarm Industries to answer the next 4 questions. On January 1,...
Use the following information about HamsterFarm Industries to
answer the next 4 questions.
On January 1, 2012, HamsterFarm Industries issued a four‐year,
$20,000, 6% bond. The interest is payable semi‐annually each June
30 and December 31. The market rate of interest on January 1, 2012
is 7%. Tonika uses the effective‐ interest amortization method.
What is the issue price of the bonds on January 1, 2012? (Round
to the nearest dollar. No dollar signs or commas).
What is the carrying...
Use the following information to answer questions 1-5. The Aggie Graphics Company was organized on January...
Use the following information to answer questions
1-5.
The Aggie Graphics Company was organized on January 1, 2017.
The trial balance before adjustment at December 31, 2017
contained the following account balances:
Cash
$9,500
Accounts Receivable
4,000
Prepaid Insurance
1,800
Equipment
45,000
Accumulated Depreciation
4,500
Accounts Payable
3,500
Notes Payable
18,000
Common Stock
5,000
Retained Earnings
12,000
Dividend
2,000
Graphic Fees Earned
52,100
Consulting Fees Earned
5,000
Salaries Expense
30,000
Supplies Expense
2,700
Advertising Expense
1,900
Rent Expense
1,500
Utilities...
Use the following information to answer the next two questions: On January 1, 2018, Jimbo Enterprises...
Use the following information to answer the next two questions:
On January 1, 2018, Jimbo Enterprises purchased new equipment for
its training center. The equipment cost $220,000. Jimbo paid
$25,000 down and is required to pay the rest in semiannual
installments for the next 8 years. Jimbo's cost of borrowing is
4%.
(a) What is the amount of the semiannual payment Jimbo will make
every six months?
(b) What is the total amount of interest expense Jimbo will pay
over...
Use the information below for ABC Co. to answer the following questions. Balance Sheet
Use the information below for ABC Co. to answer the
following questions.
Balance
Sheet December
31
2005 2004
Assets
Cash $ 20,000 $ 10,000
Accounts
receivable 160,000 110,000
Inventories
80,000 50,000
Prepaid
Rent 15,000
10,000
Investments 100,000 75,000
Plant
assets 210,000 250,000
Accumulated depreciation
(65,000) (60,000)
Total
$520,000 $445,000
Liabilities and Stockholders' Equity
Accounts
payable $ 50,000 $ 40,000
Interest payable
20,000 5,000
Income tax
payable 5,000 10,000
Note
payable 130,000 140,000
Common
stock 155,000 100,000
Retained earnings
160,000 150,000
Total
$520,000 $445,000
Income Statement
For the Year Ended December 31, 2005
Sales $800,000
Cost of goods
sold 480,000
Gross
Profit 320,000
Operating expenses (including Depreciation Expense) 120,000
Interest expense 20,000
Income...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Please explain your view of the most difficult aspect of Customs Compliance?
- You are required to write an interactive program that prompts the user for seven (7) real...
- Describe in detail the five-forces model of industry competition. What causes each of the forces to...
- Java Programming. I'm writing this in an IDE called Eclipse. If you could also use comments...
- Scenario: You are a departmental manager in a large community hospital in an urban area. Your...
- Need to answer the following 3 questions from "The Sixties, AMerican Yawp" (just google, you will...
- Write a c++ program to load two column of numbers, do arithmetic operations to the data...
ADVERTISEMENT