4. On 1 January 2018, a borrower arranged a $2,980,000 three-year 3% bond payable, with interest...
4. On 1 January 2018, a borrower arranged a $2,980,000 three-year 3% bond payable, with interest paid annually each 31 December. There was an upfront fee of $83,461, which was deducted from the cash proceeds of the bond on 1 January 2018. The bond was issued at par.
Required:
a) What net amount is received on 1 January 2018?
b) Calculate the effective interest rate associated with the loan.
c) Calculate the interest expense reported by the borrower for each of the three years. (It may be easier to prepare an amortization table, although the table is not a required part of the answer.)[CW1]
Homework Answers
a.
Net Amount Received = 2,980,000 - 83,461
Net Amount Received = $2,896,539
b.
Annual Payment = 0.03 * 2980000 = 89400
Time Period = 3 years
Using TVM calculation,
YTM = [FV = 2980000, PV = 2896539, PMT = 89400, T = 3]
YTM = 4.01%
c.
Interest Expense = $89,400 per year
Add Answer to:
4. On 1 January 2018, a borrower arranged a $2,980,000
three-year 3% bond payable, with interest...
On 1 January 20X8, a borrower arranged a $1,040,000 three-year 2% bond payable, with interest paid...
On 1 January 20X8, a borrower arranged a $1,040,000 three-year 2% bond payable, with interest paid annually each 31 December. There was an upfront fee of $111,197, which was deducted from the cash proceeds of the loan on 1 January 20X8. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the effective interest rate associated with the loan. (Round your answer to the nearest whole percentage.) 1-b. What net...
1.ABC Inc. issued $10,000,000 worth of bonds on January 14, 2018. The bonds mature on December...
1.ABC Inc. issued $10,000,000 worth of bonds on January 14, 2018. The bonds mature on December 31, 2022 and carry a coupon rate of 8% payable semi-annually on June 30 and December 31" of each year. A market interest rate of 6% was effective throughout 2018 Required: a) Were the bonds issued at a premium or a discount? b) Prepare all journal entries required during 2018. c) Assume that on January 1 2019, ABC decided to retire half of the...
Company issued a $130,000, 4%, 10-year bond payable at 97 on January 1, 2018. Interest is...
Company issued a $130,000, 4%, 10-year bond payable at 97 on January 1, 2018. Interest is paid semiannually on January 1 and July 1. 1. Journalize the issuance of the bond payable on January 1, 2018. 2. Journalize the payment of semiannual interest and amortization of the bond discount or premium on July 1, 2018.
Ari Goldstein issued $300,000 of 11%, five-year bonds payable on January 1, 2018. The market interest...
Ari Goldstein issued $300,000 of 11%, five-year bonds payable on January 1, 2018. The market interest rate at the date of issuance was 10%, and the bonds pay interest semiannually. Requirement 1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.) (Use the factor tables provided with factors rounded to three decimal places. Round all currency amounts to the nearest dollar.) Upon issuance of the bonds payable, the company received $...
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000,...
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4.25 percent, so the total proceeds from the bond issue were $102,070. Methodical 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 620 bonds, each with a face value of $1,000,...
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, eachwith a face value of $1,000,...
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...
On January 1, 2019, Tonika Company issued a four-year, $12,100,7% bond. The interest is payable annually...
On January 1, 2019, Tonika Company issued a four-year, $12,100,7% bond. The interest is payable annually each December 31. The issue price was $11,518 based on an 8% effective interest rate. Tonika uses the effective-interest amortization method. Rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2019 interest expense? Multiple Choice 1,052 Interest expense Bond discount Cash 205 847 847 Interest expense Cash Interest expense Bond discount Cash 805 42
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000,...
On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4.00 percent, so the total proceeds from the bond issue were $102,776. Methodical uses the simplified effective interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required:...
On January 1, 2019, Tonika Company issued a five-year, $10,000, 8% bond. The interest is payable...
On January 1, 2019, Tonika Company issued a five-year, $10,000, 8% bond. The interest is payable annually each December 31. The issue price was $9,611 based on an 9% effective interest rate. Tonika uses the effective-interest amortization method. The book value of the bonds as of December 31, 2019 is closest to: Multiple Choice Ο $9,676. Ο $8,811. Ο $65. Ο $9,546.
1.ABC Inc. issued $10,000,000 worth of bonds on January 14, 2018. The bonds mature on December 31, 2022 and carry a coupon rate of 8% payable semi-annually on June 30 and December 31" of each year. A market interest rate of 6% was effective throughout 2018 Required: a) Were the bonds issued at a premium or a discount? b) Prepare all journal entries required during 2018. c) Assume that on January 1 2019, ABC decided to retire half of the...
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...
On January 1, 2019, Tonika Company issued a four-year, $12,100,7% bond. The interest is payable annually each December 31. The issue price was $11,518 based on an 8% effective interest rate. Tonika uses the effective-interest amortization method. Rounding calculations to the nearest whole dollar, which of the following journal entries correctly records the 2019 interest expense? Multiple Choice 1,052 Interest expense Bond discount Cash 205 847 847 Interest expense Cash Interest expense Bond discount Cash 805 42
On January 1, 2019, Tonika Company issued a five-year, $10,000, 8% bond. The interest is payable annually each December 31. The issue price was $9,611 based on an 9% effective interest rate. Tonika uses the effective-interest amortization method. The book value of the bonds as of December 31, 2019 is closest to: Multiple Choice Ο $9,676. Ο $8,811. Ο $65. Ο $9,546.
Most questions answered within 3 hours.
-
What is the percent yield if a batch of H2SO4H2SO4 has a
theoretical yield of 3.3...
asked 56 minutes ago -
The force on a particle is given by ? ? = 3.6?3 − 4.5? + 1.5...
asked 1 hour ago -
Your organization currently offers health insurance, dental
insurance, life insurance, a 401(k) retirement program, and paid...
asked 52 minutes ago -
Opportunity for disruption is created due to:
A.Scarcity, default corporate management behavior, and human
nature.
B.Sustaining...
asked 1 hour ago -
&nb
asked 2 hours ago -
Which statement is true about the F(x,y,z) = x(yz'+x'y)
F is 1 when x is 0,...
asked 2 hours ago -
60. Which of the following is an example of the right
to work law passed in...
asked 3 hours ago -
“We must differentiate our mindset first and our lessons
second.” (Dweck, 2012). What does this saying...
asked 4 hours ago -
A plane is flying 192 m/s north relative to the air. The wind is
blowing 171...
asked 4 hours ago -
1. What is the concentration of HOAc in a 0.1M Acetate buffer,
pH 11.00?
(pKa for...
asked 4 hours ago -
What is the pressure of the gas in the flask when the levels of
water in...
asked 5 hours ago -
A team of 3 players is to be selected from a total of 10
players. What...
asked 5 hours ago