1. a
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase
b.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
c.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
d.
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
To compute: Purchase price of bonds
2.
To find: The maturity value of the bonds.
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Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
- a. Reset the Data Section to its initial values. The price of this bond is 1,407,831. What would it be if there were only 9 or 8 years to maturity? Use the worksheet to compute the bond issue prices and enter them in the spaces provided. Bond issue price (9 years to maturity) __________________ Bond issue price (8 years to maturity) __________________ b. Compare these prices to the bond-carrying values found in the effective interest amortization schedule you originally printed out in requirement 3. Explain the similarity. c. Click the Chart sheet tab. The chart presented shows the price behavior of this bond based on years to maturity. Explain what effect years to maturity has on bond prices. Check your explanation by trying 8% as the effective rate (cell E10) and clicking the Chart sheet tab again. Also try 9%. When the assignment is complete, close the file without saving it again. Worksheet. Modify the BONDS3 worksheet to accommodate bonds with up to 20-year maturity. Use your new model to determine the issue price and amortization schedules of a 2,000,000, 18-year, 10% bond issued to yield 9%. Preview the printout to make sure that the worksheet will print neatly, and then print the worksheet. Save the completed file as BONDST. Hint: Expand both amortization schedules to 20 years. Expand the scratch pad to 20 years. Modify FORMULA1 in cell F17 to include the new ranges. Chart. Using the BONDS3 file, prepare a line chart that plots annual interest expense over the 10-year life of this bond under both the straight-line and effective interest methods. No Chart Data Table is needed. Put A23 to A32 in the Label format and then select A23 to A32, D23 to D32, and B40 to B49 as a collection. Enter all appropriate titles, legends, formats, and so forth. Enter your name somewhere on the chart. Save the file again as BONDS3. Print the chart.arrow_forwardBond prices depend on the market rate of interest, stated rate of interest, and time. Read the requirements. Requirement 1. Compute the price of the following 5% bonds of Country Telecom. a. The price of the $500,000 bond issued at 75.75 is Requirements 1. 2. Compute the price of the following 5% bonds of Country Telecom. a. $500,000 issued at 75.75 b. $500,000 issued at 103.50 c. $500,000 issued at 95.75 d. $500,000 issued at 102.50 Which bond will Country Telecom have to pay the most to retire at maturity? Explain your answer. Print Done - Xarrow_forwardANSWER AS MANY QUESTIONS POSSIBLE THIS IS A STUDY GUIDE Ch 11 Bonds and LTL1. When will bonds sell at a premium and discount? 2. Calculate bond interest under SL method.3. Impact of amortization of bond premium/discount on interest expense.4. Give an example journal entry for amortization of bond premium/discount.5. What is the Gain/loss on redemption of bonds? How do you calculate?6. Understand method of calculating PV of future cash flows -specifically for a bond.7. Why are bonds a popular source of financing?8. Contract rate (market rate) is used for what calculation purpose?Ch 10 SE: Corporations1. What are Rights possessed by common stockholders?2. What are a journal entries for stock issuance, cash dividend, stock dividend?3. What is the calculation of dividends when cumulative preferred stock is outstanding?4. Journal entries for treasury stock, financial statement presentation. Gain/loss on reissue of treasury stock.5. Prior period adjustment - example of, accounting for?6.…arrow_forward
- The Excel file Immunization Using Individual Bonds contains information about three bonds. Use this data to: Yield to maturity (Expected/Current) 7% Number of Years to Future Liability 8 Future Liability $ 3,000.00 Bond 1 Bond 2 Bond 3 Coupon rate 8.00% 9.000% 7.00% Maturity 9 24 15 Face value 1,000 1,000 1,000 Explain which bond you prefer to use to attempt to immunize this obligation which is due in 8 years. Analyze each bond’s performance in attempting to achieve immunization Please show work in excel and functions/equations used.arrow_forwardFrom page 9-2 of the VLN, what is the first thing you want to identify when approaching a bond problem? Group of answer choices A. Annual bond or semiannual bond B. Whether the market rate is different from the stated rate. C. The cash flows provided by the bond. D. The company's debt to equity ratio.arrow_forwardGiven the information below, which bond(s) will be issued at a premium? Bond 1 Bond 2 Bond 3 Bond 4 Stated Rate of Return 5% 10 % 15% 12% Market Rate of Return 5% 8% 12% 14% Bond 1. Bond 2. Bond 4. Bonds 2 and 3.arrow_forward
- Calculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Time Coupon Market Accrued Commission Bonds Total Company Since Last Rate Price Interest per Bond Purchased Price Interest Company 1 9.25 102.50 78 days 2$ $5.50 15 $4arrow_forwardGiven the information below, which bond(s) will be issued at a discount? Stated Rate of Return Market Rate of Return. Bond 1. O Bond 2. Bond 4. O Bonds 1 and 2. Bond 1 5% 7% Bond 2 7% 8% Bond 3 12% 12% Bond 4 10% 9%arrow_forwardCalculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Time Coupon Market Accrued Commission Bonds Total Company Since Last Rate Price Interest per Bond Purchased Price Interest Company 1 9.25 102.50 78 days $2.05 X $5.50 15 $ 1651 Xarrow_forward
- Calculate the value of each bond and discuss whether it sells at par, discount, or premium. (Annual interest rate) O A. Bond Bond Value A B C O B. Bond A B C O C. Bond A B с O D. Bond A B C $1,149.39 Discount $1,000.00 Par $85.60 Premium Bond Value Sells at par/discount/premium Bond Value $1,149.39 Premium $1,000.00 Par $85.60 Discount Sells at par/discount/premium Bond Value Sells at par/discount/premium $1,149.39 Premium $1,000.00 Par $85.60 Premium Sells at par/discount/premium $1,049.39 Premium $1,100.00 Premium $85.60 Discount Bond Par value Coupon interest Years to rate maturity JA B IC $1000 14% $1000 18% $100 10% 120 16 18 Required return 12% 8% 13%arrow_forwardAssume a face value of a bond JD 1000, when the bond reaches maturity, if it is selling at:a. JD 900, bond value goes down to JD 850b. JD 1000, bond value goes down to JD 900c. JD 1100, bond value goes up to JD 1200 d. JD 1050, bond value goes down to JD 1000arrow_forwardCalculate the accrued interest (in $) and the total purchase price (in $) of the bond purchase. (Round your answers to the nearest cent.) Company CouponRate MarketPrice TimeSince LastInterest AccruedInterest Commissionper Bond BondsPurchased TotalPrice Company 1 8.75 102.50 78 days $ $3.50 15 $arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning