1.
Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
To calculate: The present value of the bonds payable.
2.
Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
To calculate: The present value of the bonds payable.
3.
Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
To calculate: The present value of the bonds payable.
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
- b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. Bonds Payable Cash Discount on Bonds Payable Interest Expense Interest Receivable 3. Determine the total interest expense for Year 1. Round to the nearest dollar. 4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 5. Compute the price of $23,854,460 received for the bonds by using Present value at compound interest, and Present value of an annuity. Round to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bondsarrow_forward2. DEF Company will issue $8,000,000 in 10%, 10-year bonds when the market rate of interest is 7%. Interest is paid semiannually. Required: a. Will this interest structure result in a Premium for DEF company or a Discount? b. How much cash will be received from the issuance of the bond? c. How much will the semi-annual interest payment be on the bond?arrow_forwardBond Issuance. Sander Corporation issues a P300,000, 16 percent, 10-year bond at 108. REQUIREMENTS: (a) What is the maturity value? (b) What is the annual cash interest payment? (c) What are the proceeds the company receives upon issuance of the bond? (d) What is the amount of the premium? (e) What is the annual premium amortization?arrow_forward
- 5. Compute the price of $94,580,761 received for the bonds by using the tables shown in Present Value Tables. (Round to the nearest dollar.) Present value of the face amount Present value of the semiannual interest payments Price received for the bondsarrow_forward1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. 2a. Journalize the entry to record the first semiannual interest payment on December 31, 20Y1, and the amortization of the bond premium, using the straight-line method.Compute the price of $42,601,480 received for the bonds by using the present value tablesarrow_forwardtELLiy, you must enter your ID number on the first sheet! On January 1, 2020 Omsk Corporation issued Bonds pay interest each July 1 and January 1. 150,000 of 5 % bonds, due in 17 years 12 % market rate of interest. Assume Requirements (Round to 0 decimals, Rounding errors do not matter): 1. Compute market price of bonds. Provide detailed computation. Use functions in Excel 2. What is an amount of discount /premium? Indicate, what it is (discount or premium). Computation. 3. Prepare amortization schedule for first 5 years. Use formulas in Excel. 4. Prepare journal entry to record bond issue. 5. Prepare journal entry on July 1, 2020. 6. Prepare journal entry on December 31, 2020. 7. Prepare journal entry on January 1, 2021arrow_forward
- Use the following to answer questions 8-10 (Round answers to the nearest dollar) The company issues 9%, 10-year bonds with a total face amount of $100,000. The market interest rate for bonds of similar risk and maturity is 9%. Interest is paid semiannually. What is the issue price of the bond? When the company records the 2nd interest payment, how much will the company record for 8. $ 9. $ interest expense? 10. $ . What is the bond liability (carrying amount) after the 2nd interest payment?arrow_forwardCompute bond proceeds, amortizing premium by interest method, and interest expense DATA Face amount of bonds Contract rate of interest Term of bonds, years Market rate of interest Interest payment REQUIRED: a. Compute the amount of cash proceeds from the sale of the bonds. $41,000,000 11% 3 9% Semiannual b. Compute the amount of premium to be amortized for the first semiannual interest payment period, using the interest method. c. Compute the amount of premium to be amortized for the second semiannual interest payment period, using the interest method. d. Compute the amount of the bond interest expense for the first year. Using formulas and cell references from the problem data, perform the required analysis. Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading. a. PV of cash proceeds b. Premium amortized for the 1st interest payment period c. Premium amortized for the 2nd interest payment period d. Interest expense for the 1st year…arrow_forward12. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the a. actual amount of interest paid. b. book value of the bonds multiplied by the stated interest rate. c. book value of the bonds multiplied by the effective interest rate. d. maturity value of the bonds multiplied by the effective interest rate. 13. On July 1, 2002, TJR issued 2,000 of its 8 percent, $1,000 bonds for $1,752,000. The bonds were issued to yield 10 percent. The bonds are dated July 1, 2002, and mature on July 1, 2012. Interest is payable semiannually on January 1 and July 1. Using the effective-interest method, how much of the bond discount should be amortized for the six months ended December 31, 2002? a. $15,200 b. $12,400 c. $9,920 d. $7,600arrow_forward
- 5 On January 1, Ruiz Company issued bonds as follows: Face Value: Number of Years: Stated Interest Rate: Interest payments per year 7 B 9 0 1 2 AWN IC $500,000 a) Required: 1) Calculate the bond selling price given the two market interest rates below. Use formulas that reference data from this worksheet and from the appropriate future or present value tables (found by clicking the tabs at the botto this worksheet). Note: Rounding is not required. 15 7% 2 Annual Market Rate Semiannual Interest Payment: PV of Face Value: +PV of Interest Payments: Bond Selling Price: Annual Market Rate Semiannual Interest Payment: PV of Face Value: +PV of Interest Payments: = Bond Selling Price: 9% $17,500 133,500.01 285,055.55 418,555.56 6.00% $17,500 205,993.38 5343,007.72 $549,001.10 +arrow_forward1. How much is the purchase price of the bonds? 2. Assuming that the nominal interest is 11% and the bonds were acquired to yield 13%, how much is the purchase price of the bonds? 3. Assume that the interest is payable every June 30 and December 31, how much is the purchase price of the bonds?arrow_forwardOn the first day of its fiscal year, Jacinto Company issued $14,700,000 of five-year, 8% 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 9%, resulting in Jacinto Company receiving cash of $14,118,450. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. Cash 1. 14,118,450 Discount on Bonds Payable 581,550 Bonds Payable 14,700,000 2. Interest Expense 529,845 Discount on Bonds Payable v 581,155 Cash V 588,000 Interest Expense 3. 529,845 Discount on Bonds Payable 58,155 Cash 588,000arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education