Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
Discount on bonds payable
Discount on bonds payable arises when the interest rate of the bond is less than the bond's market interest rate. This can be easily explained with an example. If a bond of $20000 is issued at an interest rate of 7% per annum and the bond market demands 7.5%, the bonds will sell for less than $20000. The difference between the face value($20000) and the amount the bond market is willing to pay is the discount on bonds payable. Further, the amount of discount is influenced by the number of years of the bond issue and the difference in the bond rate and the market rate.
Premium on bonds payable
A premium on bond payable occurs when the opposite of the above happens, i.e, the market interest rate is less than the bond rate. In this case the buyers will be willing to pay more for the bond, which creates a premium.
Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions...
Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
1. Under what conditions of bond issuance do a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise? 2. Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
e Joumalize the issuance of the bonds payable on January 1, 2018. 7. Journalize the payment of semiannual interest and amortization of the bond discount or premium (uaing the straight-ine amortization methoß) on July semiannual intereat and amortization of the bond discount or premium 1, 2018 the issuance of the bonds payable and the payment of the irst b ,2018 and Ex Jan. 1 Ju. 1 We were unable to transcribe this image
Bond Discount, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Discount On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $32,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $25,601,920. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries: For a compound transaction, if an amount box does...
When does a discount on bonds payable occur? When does a premium on bonds payable occur? Provide an example of the one you choose. Answer must be at least 150 words.
Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount Journal Instructions Chart of Accounts Final Question Instructions On July 1, 20Y1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 1. Journalize the entry to record the amount of cash...
.1. Ten-year bonds payable with face value of $87,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance. The present value of the bonds at issuance is $87,000 2. Same bonds payable as in assumption 1, but the market interest rate is 16%. The present value of the bonds at issuance is $69,955. 3. Same bonds payable as in assumption 1, but the market interest rate is 10%. The present value of the bonds...
please solve this for me, thanks PR 14-5A Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount On July 1, 2016, Merideth Industries Inc. issued $28,500,000 of 10-year, 8% bonds at a market (effective) interest rate of 9%, receiving cash of $26,646,292. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Joumalize the entry to record the amount of cash...
Exercise 9-48 (Algorithmic) Bond Premium and Discount Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $800. 1. Calculate how much Markway is able to borrow if each bond is sold at a premium of $30. $ 2. Calculate how much Markway is able to borrow if each bond is sold at a discount of $10. $ 3. Calculate how much Markway is able to borrow if each...
Bond Discount, Entries for Bonds Payable Transactions, Interest Method of Amortizing Bond Discount On July 1, 20Y1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $63,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $50,403,780. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave...