ZuoTi.Pro
Question

On January 1, Year 2002, Target issued $4,000,000 par value 20-year bonds. The bonds pay interest...

On January 1, Year 2002, Target issued $4,000,000 par value 20-year bonds. The bonds pay interest semiannually on January 1 and July 1 at an annual rate of 8 percent. The bonds were priced to yield (effective rate) 6 percent on the date of issue.  

QUESTION: Compute the issue price (cash proceeds) of the bonds on the date of issue.

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Note : As present value table is not given with the question so present value is calculated manually upto 5 decimal places answer may vary if different decimals are taken  

Answer
Issue price of Bond $               4,924,654
Calculated as
Interest semi annually =4000000*4% 160000
Period of payments =20*2 40
Present value factor discount rate =6%/2 3%
Period Amount PV @ 3% Present Value
1 to 40 Semi annual int payments 1-40 $     160,000 23.11509 $ 3,698,414.400
Maturity Value at end of 20th year period 40 $ 4,000,000 0.30656 $ 1,226,240.000
Value of bond $ 4,924,654.400
rounded off $          4,924,654
0 0
Add a comment
Know the answer?
Add Answer to:
On January 1, Year 2002, Target issued $4,000,000 par value 20-year bonds. The bonds pay interest...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • On January 1 of Year 1, Congo Express Airways issued $4,000,000 of 7%, bonds that pay...

    On January 1 of Year 1, Congo Express Airways issued $4,000,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,550,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $12,500 every 6 months. The life of these bonds is: Multiple Choice 36 years. 12 years. 32 years. 28 years 18 years.

  • On January 1, 2020, Fields Corporation issued ten-year bonds with a par value of $2,000,000. The...

    On January 1, 2020, Fields Corporation issued ten-year bonds with a par value of $2,000,000. The bonds pay interest semiannually on June 30 and December 31 at an annual rate of 10%. The bonds were issued to yield 8% annually. Fields Corporation has a fiscal year that ends August 31 each year. Fields Corporation uses the effective-interest method to calculate its interest expense each period. Required: 1. Compute the issue price of the bonds and the journal entry at issuance....

  • 14 On January 1, 2016, Broker Corp. issued $4,000,000 par value 12%, 10-year bonds which pay...

    14 On January 1, 2016, Broker Corp. issued $4,000,000 par value 12%, 10-year bonds which pay interest each December 31, lfthe market rate of interest was 14%, what was the issue price of the bonds?(The present value factor for $1 in 10 periods at 12% is 0.3220 and at 14% is 0.2697. The present va ue of an annuity of $1 factor for 10 Periods at 12% s 5.6502 and a 14% s 5,261 O$4,000000 $3,791,628, $4,452.018. $3.582.528.

  • ABC Crp. issued $8,000,000 of 8% debentures on January 1,2018. The bonds pay interest semiannually on...

    ABC Crp. issued $8,000,000 of 8% debentures on January 1,2018. The bonds pay interest semiannually on July 1 and January 1. The maturity date on these bonds is January 1, 2026. The firm uses the effective interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 10%. Required: Compute the present Value of bonds and amortization table

  • Hillside issues $4,000,000 of 6% , 15-year bonds dated January 1, 2017, that pay interest semiannually...

    Hillside issues $4,000,000 of 6% , 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31 The bonds are issued at a price of $3,456,448. Required: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. 2d For each semiannual period, complete the table below to calculate the cash payment. 2( For each semiannual period, complete the table below to calculate the straight-line discount amortization. 20 For each semiannual period, complete...

  • Sunland Company issued 10%, 9-year, $2,496,000 par value bonds that pay interest semiannually on October 1...

    Sunland Company issued 10%, 9-year, $2,496,000 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2017, and are issued on that date. The discount rate of interest for such bonds on April 1, 2017, is 12%. What cash proceeds did Sunland receive from issuance of the bonds? (Round answer to 0 decimal places, e.g. 125.) Cash proceeds from issuance of the bonds $ ______

  • PROBLEM 2 On January 1, 2018, Sunrise Corporation issued $4,000,000 face value, 8% coupon, 5-year bonds...

    PROBLEM 2 On January 1, 2018, Sunrise Corporation issued $4,000,000 face value, 8% coupon, 5-year bonds dated January 1, 2018, for $3,800,000 (market interest rate of 9.3%). The bonds pay annual interest on January 1. Instructions Prepare all the journal entries that Sunrise Corporation would make related to this bond issue through January 1, 2019, using effective interest rate method. Be sure to indicate the date on which the entries would be made.

  • ABC Corp. issued $8,000,000 of 8% debentures on January 1, 2018. The bonds pay interest semiannually...

    ABC Corp. issued $8,000,000 of 8% debentures on January 1, 2018. The bonds pay interest semiannually on July 1 and January 1. The maturity date on these bonds is January 1, 2026. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 10%. Required: Compute the present value of the bonds and the amortization table. During the test, I will provide additional instructions.

  • 1 a. On January 1 of Year 1, Congo Express Airways issued $4,000,000 of 6% bonds...

    1 a. On January 1 of Year 1, Congo Express Airways issued $4,000,000 of 6% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,630,000 and the market rate of interest for similar bonds is 7%. The bond premium or discount is being amortized at a rate of $12,333 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be? b. On...

  • 1) Johanna Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on January 1....

    1) Johanna Corporation issued $3,000,000 of 8%, 20-year bonds payable at par value on January 1. Interest is payable each June 30 and December 31. (a) Prepare the general journal entry to record the issuance of the bonds on January (b) Prepare the general journal entry to record the first interest payment on June 30. 2) A company issued 9%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT