Face Value | $6,00,000 | No. of Years | 5 | |
Bond Interest Rate | 8% | No. of Payments in a year | 2 | |
Market Rate of Interest | 10% | |||
1. Issue Price of Bonds | ||||
$5,53,670 | ||||
(Using PV Function in Excel |
2. Effective Interest Schedule | |||||
Half Year | Date | Opening | Interest @ 10% p.a | Payment | Closing |
1 | 30-06-2019 | $5,53,670 | $27,684 | $24,000 | $5,57,354 |
2 | 31-12-2019 | $5,57,354 | $27,868 | $24,000 | $5,61,221 |
3 | 30-06-2020 | $5,61,221 | $28,061 | $24,000 | $5,65,282 |
4 | 31-12-2020 | $5,65,282 | $28,264 | $24,000 | $5,69,546 |
5 | 30-06-2021 | $5,69,546 | $28,477 | $24,000 | $5,74,024 |
6 | 31-12-2021 | $5,74,024 | $28,701 | $24,000 | $5,78,725 |
7 | 30-06-2022 | $5,78,725 | $28,936 | $24,000 | $5,83,661 |
8 | 31-12-2022 | $5,83,661 | $29,183 | $24,000 | $5,88,844 |
9 | 30-06-2023 | $5,88,844 | $29,442 | $24,000 | $5,94,286 |
10 | 31-12-2023 | $5,94,286 | $29,713 | $6,24,000 | $0 |
(Interest in 10th period is subtracted by 1 due to decimal differences and to make closing balance 0.)
3. Journal Entries | |||
Date | Accounts | Dr. | Cr. |
01-01-2019 | Bank Dr | $5,53,670 | |
Deferred Interest Expense Dr | $46,330 | ||
To 8% Bonds | $6,00,000 | ||
(Being issuance of Bonds.) | |||
30-06-2019 | Interest Expense Dr | $27,684 | |
To Bank | $24,000 | ||
To Deferred Interest Expense | $3,684 | ||
(Being First Interest payment.) | |||
31-12-2023 | Interest Expense Dr | $29,713 | |
8% Bonds Dr | $6,00,000 | ||
To Bank | $6,24,000 | ||
To Deferred Interest Expense | $5,713 | ||
(Being last Interest payment and Bond Repayment.) |
(B)
Cash Payment | $3,500 | |
Loan Amount | $25,000 | |
Months | 15 | |
Interest Rate | 9% | |
1. Monthly Installment | ||
$1,768 | ||
=PMT(9%/12,15,25000,0,0) |
2. Amortization Schedule | ||||
Month | Opening | Interest | Installment | Closing |
1 | $25,000 | $188 | $1,768 | $23,419 |
2 | $23,419 | $176 | $1,768 | $21,826 |
3 | $21,826 | $164 | $1,768 | $20,222 |
4 | $20,222 | $152 | $1,768 | $18,605 |
5 | $18,605 | $140 | $1,768 | $16,976 |
6 | $16,976 | $127 | $1,768 | $15,335 |
7 | $15,335 | $115 | $1,768 | $13,682 |
8 | $13,682 | $103 | $1,768 | $12,016 |
9 | $12,016 | $90 | $1,768 | $10,337 |
10 | $10,337 | $78 | $1,768 | $8,647 |
11 | $8,647 | $65 | $1,768 | $6,943 |
12 | $6,943 | $52 | $1,768 | $5,227 |
13 | $5,227 | $39 | $1,768 | $3,497 |
14 | $3,497 | $26 | $1,768 | $1,755 |
15 | $1,755 | $13 | $1,768 | $0 |
3. Journal Entries | |||
Date | Accounts | Dr. | Cr. |
01-04-2019 | Rafts Dr | $28,500 | |
To Cash | $3,500 | ||
To Note Payable | $25,000 | ||
(Being purchase of fleet of 10 fishing rafts.) | |||
30-04-2019 | Interest Expense Dr | $188 | |
Note Payable Dr | $1,581 | ||
To Cash | $1,768 | ||
(Being first payment of Installment on Note.) | |||
31-05-2019 | Interest Expense Dr | $176 | |
Note Payable Dr | $1,593 | ||
To Cash | $1,768 | ||
(Being second payment of Installment on Note.) |
Hatch Fly-fishing Company issued $600,000 face value bonds on January 1, 2019, with semiannual interest payments...
ABC Company issued $200,000 face value bonds on January 1, 2017, with semiannual interest payments to be made on June 30 and December 31 at a contract rate of 10%. The bonds were scheduled to mature five years after they were issued. On January 1, 2020, three years after the bonds were issued, the company repurchased 40% of the outstanding bonds for $79,000. Required: Part A 1. Assume that the bonds were issued when the market rate of interest snow...
On January 1, 2017, BAJA Corporation purchased bonds with a face value of $600,000 for $616,747.06 The bonds are due June 30, 2020, carry a 13% stated interest rate, and were purchased to yield 12%. Interest is payable semiannually on June 30 and December 31. On March 31, 2018, in contemplation of a major acquisition, the company sold one-half the bonds for $319,000 including accrued interest; the remainder were held until maturity. Prepare an investment interest income and bond premium...
Edit A B D E F G Hatch Fly fishing Company wants to buy a fleet of 10 fishing rafts from Rocky Mountain Rafts. Rocky Mountain Rafts agrees to sell the rafts to Hatch in exchange for $3,500 cash and a $25,000 note that would be payable in monthly installments for 15 months. The rate of interest on the note is 9%. 2 3 Required: Part 1 4 5 Part 2 Part 3 Calculate the amount of Hatch's monthly payment....
On January 1, 2018, Loop Raceway issued 620 bonds, each with a face value of $1,000, a stated interest rate of 7 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 8 percent, so the total proceeds from the bond issue were $604,002. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare...
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 6 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 5.50 percent, so the total proceeds from the bond issue were $101,347. Methodical uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare...
On January 1, 2019. Company C. issued five-year bonds with a face value of $500,000 and a coupon interest rate of 6%, with interest payable semi-annually. 1. Prepare a partial bond amortization table for the first two interest payments assuming that interest is paid on July 1 and January 1 and that the bonds sold based on the following scenario 2. Record the journal entries relating to the bonds on January 1, July 1, and December 31 Market Rate 5%...
On January 1, 2019, Company C. issued five-year bonds with a face value of $500,000 and a coupon interest rate of 6%, with interest payable semi-annually. 1. Prepare a partial bond amortization table for the first two interest payments assuming that interest is paid on July 1 and January 1 and that the bonds sold based on the following scenario. 2. Record the journal entries relating to the bonds on January 1, July 1, and December 31 Market Rate 7%...
On January 1, 2018, Surreal Manufacturing issued 620 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $602,797. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare...
On January 1, 2018, Surreal Manufacturing issued 630 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $612,519. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.Required:1. Prepare a bond...
Check my work On January 1, 2018. Loop Raceway issued 640 bonds, each with a face value of $1000, a stated interest rate of 6 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 7 percent, so the total proceeds from the bond issue were $623.205. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year....