I am having problems with exercise 14 Stanford issue bonds dated January 1, 2015
ID: 2452047 • Letter: I
Question
I am having problems with exercise 14 Stanford issue bonds dated January 1, 2015, with a par value of $500,000. The bonds annual contrast rate is 9% and interest is paid semiannually on June 30 and the 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 $463,140. what is the amount of the discount on these bonds at issuance? how much total bond interest expense will be recognized over the life of these bonds? prepare an amortization table like the one in Exhibit 10B. 1 for these bonds; use the effective interest method to amortize the discount. Quarto Co, issues bonds dated January 1, 2015 with a par value of $400,000. The bonds' annual contrast rate is 13% 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 $409,850 what is the amount of the premium on these bonds at issuance? How much total bond interest expense will be recognized over the life of these bonds? prepare an amortization table like the one in Exhibit 10B.2 for these bonds? for these bonds; use the effective interest method to amortize the premium. Duval Co. issues four-years bonds with a $100,000 par value on June 1, 2015, at a price of $95,948. The annual contract rate is 7% and interest is paid semiannually on November 30 and may 31. prepare an amortization table like the one in Exhibit 10.7 for these bonds. Use the straight-line method of interest amortization. prepare journal entries tg record the first two interest payments and to accrue interest as f December 31, 2015 on may 1, 2015, Brussels Enterprises issue bonds dated January 1, 2015 that have a $3,400,000 par value mature in 20 years, and pay 9% interest semiannually on June 30 and December 31. The bonds are sold at par plus four months accrued interest.Explanation / Answer
Sale value of the bond 409,850 Face value of the bond 400,000 1 Premium on bond issuance 9,850 2 Interest on bond over its life interest rate on bond 0.13 interest paid semianually 0.0650 13/2 bond period 3 yrs interest payment period(3*2) 6 Interest for one period 26,000.00 (400000*0.065) Total interest over bond life 156,000 (26000*6) 3 Amortisation of bond premium using effective interest method Date Interest payment interest exp Amorisation of bond premium balance in bond premium balance in bond Payable Book value of bond 1/1/2015 9,850 400,000 409,850 30-Jun 26,000 24,591 1,409 8,441 400,000 408,441 31-Dec 26,000 24,506 1,494 6,947 400,000 406,947 30-Jun 26,000 24,417 1,583 5,364 400,000 405,364 31-Dec 26,000 24,322 1,678 3,686 400,000 403,686 30-Jun 26,000 24,221 1,779 1,907 400,000 401,907 31-Dec 26,000 24,114 1,886 22 400,000 400,022
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