Question
In: Accounting
On January 1, 2015, the Mayfield Corporation issued $500 million of zero-coupon debentures, due December 31,...
On January 1, 2015, the Mayfield Corporation issued $500 million of zero-coupon debentures, due December 31, 2025. The proceeds of the bond sale totaled approximately $192.772 million. Assuming semi-annual compounding, estimate the effective interest rate on the zero-coupon debentures. Calculate the interest expense incurred by the Mayfield Corporation during the first year that the debt was outstanding.
Calculate the interest expense incurred by the Mayfield
Corporation during the first year that the debt was
outstanding.
State your answer in $ millions and round your answers to one
decimal place.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2015, the Mayfield Corporation issued $500 million of zero-coupon debentures, due December 31,...
On January 1, 2015, the Mayfield Corporation issued $500 million
of zero-coupon debentures, due December 31, 2025. The proceeds of
the bond sale totaled approximately $192.772 million. Assuming
semi-annual compounding, estimate the effective interest rate on
the zero-coupon debentures. Calculate the interest expense incurred
by the Mayfield Corporation during the first year that the debt was
outstanding.
On January 2, 2015, L Corporation issued $2,050,000 of 10% bonds at 96 due December 31,...
On January 2, 2015, L Corporation issued $2,050,000 of 10% bonds
at 96 due December 31, 2024. Interest on the bonds is payable
annually each December 31. The discount on the bonds is also being
amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the
preferable “interest method.”)
The bonds are callable at 101 (i.e., at 101% of face amount), and
on January 2, 2020, L Corp. called $1,230,000 face amount of...
On January 2, 2015, Concord Corporation issued $1,300,000 of 10% bonds at 98 due December 31,...
On January 2, 2015, Concord Corporation issued $1,300,000 of 10%
bonds at 98 due December 31, 2024. Interest on the bonds is payable
annually each December 31. The discount on the bonds is also being
amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the
preferable “interest method.”)
The bonds are callable at 101 (i.e., at 101% of face amount),
and on January 2, 2020, Concord called $780,000 face amount of the...
Debt Valuation: Zero-Coupon Debentures At the beginning of the year, KMF Inc. issued $50 million (maturity...
Debt Valuation: Zero-Coupon Debentures
At the beginning of the year, KMF Inc. issued $50 million
(maturity value) of 15-year, zero-coupon debentures, at a time when
the yield rate was four percent per period. The KMF, Inc. bonds
would be subject to semiannual compounding.
Round all answers to the nearest whole
number.
Calculate the proceeds received by KMF Inc. when the bonds were
sold.
$Answer
Calculate the cost to repurchase and retire the bonds after five
years assuming that the market...
TREATMENT OF CONVERTIBLE DEBENTURES LS Limited issued 1 million six-year debentures on 1 January 2018 at...
TREATMENT OF CONVERTIBLE DEBENTURES
LS Limited issued 1 million six-year debentures on 1 January 2018
at par value of £ 100 each at a fixed rate of 6% per annum.
Interest payable at the end of each year whereas the principal is
to be repaid in two equal installments at the end of 2022 and
2023.
Debentures were issued with an option to convert 10 debentures into
4 ordinary shares of LS Limited till the date of first principal
redemption....
On January 1, 2016, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2020, for...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year
bonds due December 31, 2020, for $103,604.79 minus debt issuance
costs of $3,000. The bonds carry a stated rate of interest of 13%
payable annually on December 31 and were issued to yield 12%. The
company uses the effective interest method of amortization to
amortize any discounts or premiums and the straight-line method to
amortize the debt issuance costs.
Required:
Prepare the journal entries to
record the issuance of the...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2020, for...
On January 1, 2016, Gates Corporation issued $100,000 of 5-year
bonds due December 31, 2020, for $103,604.79 minus debt issuance
costs of $3,000. The bonds carry a stated rate of interest of 13%
payable annually on December 31 and were issued to yield 12%. The
company uses the effective interest method of amortization to
amortize any discounts or premiums and the straight-line method to
amortize the debt issuance costs.
Required: Prepare the journal entries to record the issuance of
the...
On January 1, 2017, Olson Corporation issued $6 million of 10-year, 7%, convertible debentures at 104....
On January 1, 2017, Olson Corporation issued $6 million of
10-year, 7%, convertible debentures at 104. Investment bankers
believe that the debenture would have sold at 102 without the
conversion privilege. Interest is to be paid semi-annually on June
30 and December 31. Each $1,000 debenture can be converted into
five common shares of Olson after December 31, 2018. On January 1,
2016, $400,000 of debentures is converted into common shares, and
on March 31, 2019, an additional $400,000 of...
On January 2, 2012, Marin Corporation issued $1,050,000 of 10% bonds at 97 due December 31,...
On January 2, 2012, Marin Corporation issued $1,050,000 of 10%
bonds at 97 due December 31, 2021. Interest on the bonds is payable
annually each December 31. The discount on the bonds is also being
amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the
preferable “interest method”.)
The bonds are callable at 102 (i.e., at 102% of face amount), and
on January 2, 2017, Marin called $630,000 face amount of the...
On January 1, 2021, Darnell Window and Pane issued $18 million of 10-year, zero-coupon bonds for...
On January 1, 2021, Darnell Window and Pane issued $18 million
of 10-year, zero-coupon bonds for $5,795,518. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate
factor(s) from the tables provided.)
Required: 2. Determine the effective rate of interest. 1. &
3. to 5. Prepare the necessary journal entries
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