Homework Answers
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Statement C is incorrect.
Justification:
a. this is correct since market rate and stated rate both are same.
b. this is correct since market rate and stated rate both are same. and bond is issued at par as proved in A.
d. Since both interest rates are same, interest expense and outflow will be same.
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12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest....
11. Eaton Company issued $5 million of bonds with a 10% coupon rate of interest. When...
11. 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 11 %. Wwhich of the following statements is correct? a) The bonds were issued at a premium. b) Annual interest expense will exceed the company's actual cash payments for interest c) Annual interest expense will be $500,000. d) The book value of the bond will decrease as the bond matures.
22. On January 1, 2019, a company issued $400,000 of 10-year, 12% bonds. The interest is...
22. On January 1, 2019, a company issued $400,000 of 10-year, 12% bonds. The interest is payable semiannually on June 30 and December 31. The issue price was $413,153 based on a 10% market interest rate. The effective interest method of amortization is used. Which of the following statements is incorrect? a) The market rate of interest on the sale date was less than the coupon rate of interest. b) The book value of the bond will decrease as the...
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6 %...
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6 % Yield: 4 % Life: 15 years a. Compute the selling price of the bonds. Prepare the journal entry for the issuance of the bonds using the selling price from part (a). c. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE d. Prepare the journal entry to record...
. Gears Inc. issued $10 million par value of bonds in 20X7 with an annual coupon...
. Gears Inc. issued $10 million par value of bonds in 20X7 with an annual coupon rate of 8.0%. The bonds were issued at a price of $1,050 per $1000 par value, and they mature in ten years. The total interest cost of these bonds over their life is: A. $8,500,000. B. $8,400,000. C. $8,000,000. D. $7,500,000
1. On January 1, Princeton, Inc. issued $2 million of 8% bonds at 93.5% of par,...
1. On January 1, Princeton, Inc. issued $2 million of 8% bonds at 93.5% of par, based on an effective rate of 9%. The bonds pay interest on June 30 and December 31. Using the effective interest rate method, Princeton’s bond liability immediately after the first coupon payment is made is closest to: $1,870,000. $1,874,150. $2,000,000. 2. On January 1, Princeton, Inc. issued $2 million of 8% bonds at 93.5% of par, based on an effective rate of 9%. The...
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate....
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate. b) At a rate that provides a large discount at issuance. c) At a rate that has zero difference between the coupon rate and the market rate of interest. d) As bonds that will have zero amortization recorded over the life of the bond.
Part C A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield:...
Part C
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield: 4% Life: 15 years a. Compute the selling price of the bonds. b. Prepare the journal entry for the issuance of the bonds using the selling price from part (a). C. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE
Which of the following statements does not correctly describe the accounting for bonds that were issued...
Which of the following statements does not correctly describe the accounting for bonds that were issued at their face (maturity) value? Multiple Choice The present value of the bonds' future cash flows equals the bonds' maturity value. The interest expense over the life of the bonds will equal the total cash interest payments. The book value of the bond liability decreases when interest payments are made on the due dates. The market rate of interest equals the coupon rate.
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield: 4 %...
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield: 4 % Life: 15 years C. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE 91193,595 D $4500 $3,672 $828. $182,767 $4,500 $3,655 $845 $181922 .. Prepare the journal entry to record the first interest payment on the bonds using the schedule completed in part (c).
P10-3 10-2, 10-4, 10-5 Comparing Bonds Issued at Par, at a Discount, and at a Premium...
P10-3 10-2, 10-4, 10-5 Comparing Bonds Issued at Par, at a Discount, and at a Premium (AP10-2) On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,000 and a coupon rate of 7 percent. The bonds mature in 10 years and pay interest annually on December 31. Barnett uses the effective interest amortization method. Ignore any tax effects. Each case is independent of the other cases Required: Complete the following table. The interest rates...
11. 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 11 %. Wwhich of the following statements is correct? a) The bonds were issued at a premium. b) Annual interest expense will exceed the company's actual cash payments for interest c) Annual interest expense will be $500,000. d) The book value of the bond will decrease as the bond matures.
22. On January 1, 2019, a company issued $400,000 of 10-year, 12% bonds. The interest is payable semiannually on June 30 and December 31. The issue price was $413,153 based on a 10% market interest rate. The effective interest method of amortization is used. Which of the following statements is incorrect? a) The market rate of interest on the sale date was less than the coupon rate of interest. b) The book value of the bond will decrease as the...
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate. b) At a rate that provides a large discount at issuance. c) At a rate that has zero difference between the coupon rate and the market rate of interest. d) As bonds that will have zero amortization recorded over the life of the bond.
Part C
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield: 4% Life: 15 years a. Compute the selling price of the bonds. b. Prepare the journal entry for the issuance of the bonds using the selling price from part (a). C. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE
Which of the following statements does not correctly describe the accounting for bonds that were issued at their face (maturity) value? Multiple Choice The present value of the bonds' future cash flows equals the bonds' maturity value. The interest expense over the life of the bonds will equal the total cash interest payments. The book value of the bond liability decreases when interest payments are made on the due dates. The market rate of interest equals the coupon rate.
A company issued the following semi-annual bonds: Face amount: $150,000 Coupon rate: 6% Yield: 4 % Life: 15 years C. Prepare the amortization schedule for only the first two interest periods using the interest method. CASH INTEREST EXPENSE AMORTIZATION BOOK VALUE 91193,595 D $4500 $3,672 $828. $182,767 $4,500 $3,655 $845 $181922 .. Prepare the journal entry to record the first interest payment on the bonds using the schedule completed in part (c).
P10-3 10-2, 10-4, 10-5 Comparing Bonds Issued at Par, at a Discount, and at a Premium (AP10-2) On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,000 and a coupon rate of 7 percent. The bonds mature in 10 years and pay interest annually on December 31. Barnett uses the effective interest amortization method. Ignore any tax effects. Each case is independent of the other cases Required: Complete the following table. The interest rates...
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