Question

In: Accounting

1. Reed Corp. sells $700,000 of bonds to private investors. The bonds are due in five...

1. Reed Corp. sells $700,000 of bonds to private investors. The bonds are due in five years, have a 4% coupon rate and interest is paid semiannually. The bonds were sold to yield 6%. What proceeds does Reed receive from the investors?

2. Sykora Corp. sells $450,000 of bonds to private investors. The bonds are due in 5 years, have a 6% coupon rate and interest is paid semiannually. Sykora received $490,222 for the bonds at issuance. The effective rate on these bonds is:

3. Heller Company issues $950,000 of 10% bonds that pay interest semiannually and mature in 10 years. What is the bonds’ issue price assuming that the bonds’ market interest rate is 14% per year?

Solutions

Expert Solution

Req 1.
Maturity value of bonds 700000
Cash Semi annual interest (700000*4%*6/12) 14000
Annuity PVF at 3% for 10 periods 8.5302
PVF at 3% for 10th perriod 0.74409
Present value of Maturity value 520863
Present value of interest 119422.8
issue price 640285.8
Req 2.
Maturity value of bonds 450000
Cash Semi annual interest (450000*6%*6/12) 13500
Annuity PVF at 2% for 10 periods 8.9825
PVF at 2% for 10th perriod 0.8203
Present value of Maturity value 369135
Present value of interest 121263.8
issue price 490398.8
Hence, Market yield is 4% approx
Req 3.
Maturity value of bonds 950000
Cash Semi annual interest (950000*10%*6/12) 47500
Annuity PVF at 7% for 20 periods 10.59401
PVF at 7% for 20th perriod 0.25842
Present value of Maturity value 245499
Present value of interest 503215.5
issue price 748714.5

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Reed Corp. sells $500,000 of bonds to private investors on January 1, 2020. The bonds are...
Reed Corp. sells $500,000 of bonds to private investors on January 1, 2020. The bonds are due in five years, have a 8% coupon rate, and interest is paid semi-annually on June 30 and December 31. The bonds were sold to yield 6%. Required: 1 Determined the bond issue prince. 2 Prepare journal entry to record the interest payment on June 30, 2020. 3 Prepare journal entry to record the interest payment on December 31, 2020. 4 What was the...
Fly by Night Corp. sells $600,000 of bonds to investors. The bonds have a 7% annual...
Fly by Night Corp. sells $600,000 of bonds to investors. The bonds have a 7% annual coupon rate and seminannuall coupon payments. The bonds were sold to yield 10%. What seminannual payment does Fly by Night make to the investors?
The University of Alaska sells three-year bonds with an $800,000 face value to private investors. The...
The University of Alaska sells three-year bonds with an $800,000 face value to private investors. The bonds are due in three years, have an 8% coupon rate and interest is paid annually. The bonds were sold to yield 6%. What proceeds does UA receive from the investor Did the bond sell for par, a premium or a discount? How much was the premium or discount? If the bond sold for a premium or discount, what is the balance in the...
Sanders Co. issued $700,000 of 5% bonds on January 1, 2021, due on January 1, 2026,...
Sanders Co. issued $700,000 of 5% bonds on January 1, 2021, due on January 1, 2026, with interest payable each January 1 and July 1. The bonds were sold to yield 10%. If the discount were amortized by the effective-interest method, what amount of interest expense would Sanders report in 2021 related to the bond?
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The...
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The bonds were dated January 1, 2019 and mature in four years on January 1, 2023. The bonds pay interest semi-annually each June 30th and December 31st. At the time of issuance, the market rate of interest for similarly risky investments was 6%. Requirements: At what amount were the bonds issued on January 1, 2019? Assuming Gleason Corp.’s fiscal year ends May 31st, prepare all...
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The...
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The bonds were dated January 1, 2019 and mature in four years on January 1, 2023. The bonds pay interest semi-annually each June 30th and December 31st. At the time of issuance, the market rate of interest for similarly risky investments was 6%. 1. At what amount were the bonds issued on January 1, 2019? 2. Prepare an amortization schedule for the life of the...
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The...
On January 1, 2019, Gleason Corp. issued $700,000, 8% bonds payable to finance company expansion. The bonds were dated January 1, 2019 and mature in four years on January 1, 2023. The bonds pay interest semi-annually each June 30th and December 31st. At the time of issuance, the market rate of interest for similarly risky investments was 6%. 1. At what amount were the bonds issued on January 1, 2019? 2. Prepare an amortization schedule for the life of the...
Assume XYZ Corp. sells $100,000 of five-year bonds with a semiannual coupon of 5%, or 10%...
Assume XYZ Corp. sells $100,000 of five-year bonds with a semiannual coupon of 5%, or 10% per year. Investors think the company is risky, so they demand a 12% yield to maturity for buying these bonds. a) What is the bond price? b) How much is the total Discount/Premium? c) Do all the required the journal entries (Original issuance of the bond, interest payment and the final payment) d) Show the amortization table using both Straight line method and Effective...
Matt Winne​, Inc. issued $700,000 of 9​%, five​-year bonds payable on January​ 1, 2018. The market...
Matt Winne​, Inc. issued $700,000 of 9​%, five​-year bonds payable on January​ 1, 2018. The market interest rate at the date of issuance was 6​%, and the bonds pay interest semiannually. 1. How much cash did the company receive upon issuance of the bonds​ payable? (Round to the nearest​ dollar.) 2. Prepare an amortization table for the bond using the​ effective-interest method, through the first two interest payments.​ (Round to the nearest​ dollar.) 3. Journalize the issuance of the bonds...
P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds...
P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31, Instructions a. Prepare the journal entry to record the issuance of the bonds. b. Prepare the adjusting entry to record the accrual of interest on December 31, 2021. c. Show the balance sheet presentation of bonds payable and bond...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT