Homework Answers
Answer : B = At a rate that provides a large discount at issuance.
>> Zero coupon bonds means coupon rate is zero i.e there is no payment to investors.
>> Zero coupon bonds generally issued at discount and redeemed at par value.
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15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate....
On January 1, Soren Enterprises issued 15-year bonds with a face value of $200,000. The bonds...
On January 1, Soren Enterprises issued 15-year bonds with a face value of $200,000. The bonds carry a coupon rate of 8 percent, and interest is paid semi-annually. On the issue date, the annual market interest rate for bonds issued by companies with similar riskiness was 10 percent. The issuance price of the bonds was $169,255. Which ONE of the following would be included in the journal entry necessary on the books of the bond issuer to record the SECOND...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1,...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $250,000. The bonds' annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $231,570. 1. What is the amount of the discount on these bonds at issuance? 2. How...
Check my work Exercise 14-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds...
Check my work Exercise 14-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $258,000. The bonds' annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $244,471. 1. What is the amount of the discount on these bonds at...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1,...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $252,000. The bonds' annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $245,391. 1. What is the amount of the discount on these bonds at issuance? 2. How...
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest....
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 10 %. Which of the following statements is incorrect? a) The bonds were issued at par. b) Annual interest expense will equal the company's annual cash payments for interest. The book value of the bonds will decrease as cash interest payments are made. c) d) Annual interest expense is the same regardless of...
Entries for issuing Bonds and Amortizing Discount by straight-Ure H UU On the first day of...
Entries for issuing Bonds and Amortizing Discount by straight-Ure H UU On the first day of its fiscal year, Chin Company issued $10,000,000 of five year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective interest rate of 8%, resulting in Chin Company receiving cash of $9,594,415. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest...
3 Q067 Zero Coupon Bonds Zero-coupon bonds are sold at a substantial discount from the face...
3 Q067 Zero Coupon Bonds Zero-coupon bonds are sold at a substantial discount from the face value, and the buyer receives the face value of the bond when it matures. The difference between the face value and the price of the bond is the interest earned To determine the purchase amount of a zero-coupon bond. Calculate the present value of the Future value) maturity value. Veronica bought a 15-year zero-coupon bond paying 7% (annual rate) interest (compounded semiannually) for $8.906.96....
Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%,...
Cramer Corp. issued $20,000,000 of 5-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $19,227.757. Interest on the bonds is payable semiannually. Journalize the entry to record the first semiannual interest payment, and the amortization of the bond discount, using the interest method?
36. If bonds are issued initially at a premium and the effective-interest method of amortization is...
36. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be A) greater than if the straight-line method were used. B) greater than the amount of the interest payments. C) the same as if the straight-line method were used. D) less than if the straight-line method were used. 37. Stockholders' equity is generally classified into two major categories: A) contributed capital and appropriated capital. B) appropriated...
On December 31, 2018, P. Star Corporation issued $300,000, 12%, 15-year bonds for $346,120 cash when...
On December 31, 2018, P. Star Corporation issued $300,000, 12%, 15-year bonds for $346,120 cash when the market rate of interest was 10%. The bonds pay interest semi-annually each June 30 and December 31. P. Star uses the effective interest method of amortization to amortize any premium or discount. Give the required journal entries on (1) December 31, 2018, the issue date and (2) June 30, 2019, the first interest payment date in the attached workpaper. You do not have...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $250,000. The bonds' annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $231,570. 1. What is the amount of the discount on these bonds at issuance? 2. How...
Check my work Exercise 14-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $258,000. The bonds' annual contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $244,471. 1. What is the amount of the discount on these bonds at...
Exercise 10-18B Effective Interest: Amortization of bond discount LO P5 Stanford issues bonds dated January 1, 2019, with a par value of $252,000. The bonds' annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $245,391. 1. What is the amount of the discount on these bonds at issuance? 2. How...
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 10 %. Which of the following statements is incorrect? a) The bonds were issued at par. b) Annual interest expense will equal the company's annual cash payments for interest. The book value of the bonds will decrease as cash interest payments are made. c) d) Annual interest expense is the same regardless of...
Entries for issuing Bonds and Amortizing Discount by straight-Ure H UU On the first day of its fiscal year, Chin Company issued $10,000,000 of five year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective interest rate of 8%, resulting in Chin Company receiving cash of $9,594,415. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest...
3 Q067 Zero Coupon Bonds Zero-coupon bonds are sold at a substantial discount from the face value, and the buyer receives the face value of the bond when it matures. The difference between the face value and the price of the bond is the interest earned To determine the purchase amount of a zero-coupon bond. Calculate the present value of the Future value) maturity value. Veronica bought a 15-year zero-coupon bond paying 7% (annual rate) interest (compounded semiannually) for $8.906.96....
36. If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be A) greater than if the straight-line method were used. B) greater than the amount of the interest payments. C) the same as if the straight-line method were used. D) less than if the straight-line method were used. 37. Stockholders' equity is generally classified into two major categories: A) contributed capital and appropriated capital. B) appropriated...
On December 31, 2018, P. Star Corporation issued $300,000, 12%, 15-year bonds for $346,120 cash when the market rate of interest was 10%. The bonds pay interest semi-annually each June 30 and December 31. P. Star uses the effective interest method of amortization to amortize any premium or discount. Give the required journal entries on (1) December 31, 2018, the issue date and (2) June 30, 2019, the first interest payment date in the attached workpaper. You do not have...
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