Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 14%, which implies a selling price of 75 %. The effective interest method is used to allocate interest expense. Contract rate Term (years) Par value Market rate Selling price Payments per year Cash proceeds 10% 15 Required: 1. What are the issuer's cash proceeds from issuance of these bonds using the implied selling price? $240,000 14% 75.25% 2 2. What total amount of bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid: payments of Par value at maturity Total repayments Less amount borrowed (from part 1) Total bond interest expense Bond interest expense 3. What amount of bond interest expense is recorded on the first interest payment date?

Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 14%, which implies a selling price of 75 %. The effective interest method is used to allocate interest expense. Contract rate Term (years) Par value Market rate Selling price Payments per year Cash proceeds 10% 15 Required: 1. What are the issuer's cash proceeds from issuance of these bonds using the implied selling price? $240,000 14% 75.25% 2 2. What total amount of bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid: payments of Par value at maturity Total repayments Less amount borrowed (from part 1) Total bond interest expense Bond interest expense 3. What amount of bond interest expense is recorded on the first interest payment date?

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.3E: Issue Price The following terms relate to independent bond issues: 500 bonds; $1,000 face value; 8%...

See similar textbooks

Similar questions

Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date. Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was received upon issuance?
On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest payments are paid annually, each interest payment will be ________. A. $120,000 B. $60,000 C. $7,500 D. $15,000
Analyze the following: On January 1, M4 Engineering issued $5,000,000 of 8-year bonds with a contract rate of 7.5% when market rates are 10%. Interest payments are semi-annual. M4 Engineering received $4,322,000 in cash. Issue Date Face Amount Term Contract Rate Payment Frequency Interest Payment Amount Bond Proceeds Market (effective) rate Maturity Amount
Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 2. The straight-line method is used to allocate interest expense. 1. Using the implied selling price of 87 2, what are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using the implied selling price of 87 V2, what are the issuer's cash proceeds from issuance of these bonds? Cash proceeds
A company issues GHS10 million of 6% bonds at a price of GHS100.50 for easch GHS100 nominal value with issue costs of GHS50,000. The bonds are redeemable after four years for GHS10,444,000.The effective annual interest for this financial instrument is 7%.Required:Calculate the amortised cost for the bond and show the interest income for each year to maturity.
Marwick Corporation issues 12%, 5-year bonds with a par value of $1,230,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%. What is the bond's issue (selling) price, assuming the following Present Value factors: number of periods (n)- 5 10 5 10 Multiple Choice Present Value of an interest rate Annuity (series of $1,019,244 $1,324,958 $1,230,000 $660,139 $1,799,861 12% 10% 5% payments) 3.6048 7.3601 3.7908 7.7217 Present value of 1 (single sum) 0.5674 0.5584 0.6209 0.6139
Enviro Company issues 8%, 10-year bonds with a par value of $340,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1/2. The straight-line method is used to allocate interest expense. 1. What are the issuer's cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What is the amount of bond interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What total amount of bond interest expense will be recognized over the life of these bonds? Note: Round final answers to the nearest whole dollar amount. Total Bond Interest Expense Over Life of Bonds: Amount repaid: 20 payments of Par value at maturity $ 13,600 $ Total repayments Less amount borrowed (cash proceeds from part 1) Total bond interest expense < $ Required…
Tano Company issues bonds with a par value of $180,000 on January 1 of the current year. The bonds' annual contract rate is 8%, 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 10%, and the bonds are sold for $170,864. Par value Contract rate Term Market rate Proceeds Payments per year Required: 1. What is the amount of the discount on these bonds at issuance? Discount Total repaid Less amount borrowed Total bond interest expense $9,136 2. How much total bond interest expense will be recognized over the life of these bonds? Total Bond Interest Expense Over Life of Bonds: Amount repaid: GUEUNEO (0) 2 payments of Par value at maturity (2) (3) (4) (5) (6) Amount of semi-annual discount amortization $180,000 896 3. Prepare a straight-line amortization table for these bonds. Semiannual Period-End 3 years 10% $170,864 2 1/1/2024 6/30/2024 12/31/2024 6/30/2025 12/31/2025 6/30/2026 12/31/2026 $5,400…
Enviro Company issues 8%, 10-year bonds with a par value of $290,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 1⁄2. The straight-line method is used to allocate interest expense. 1. What are the issuer's cash proceeds from issuance of these bonds?2. What total amount of bond interest expense will be recognized over the life of these bonds?3. What is the amount of bond interest expense recorded on the first interest payment date?
Determine the market price of a $485,000, 10-year, 8% (pays interest semiannually) bond issue sold to yield an effective rate of 10%.
Enviro Company issues 8%, 10-year bonds with a par value of $200,000 and semiannual interest payments. On the Issue date, the annual market rate for these bonds is 10%, which implies a selling price of 87 12. The straight-line method is used to allocate interest expense. 1. What are the issuer's cash proceeds from Issuance of these bonds? 2. What total amount of bond Interest expense will be recognized over the life of these bonds? 3. What is the amount of bond Interest expense recorded on the first interest payment date? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Answer is complete but not entirely correct. Required 3 What total amount of bond interest expense will be recognized over the life of these bonds? Note: Round final answers to the nearest whole dollar amount. payments of Par value at maturity Total Bond Interest Expense Over Life of Bonds: Amount repaid: 20 $ 168,000 $ 3,360,000 200,000 3,560,000 Total repayments Less amount…
Garcia Company issues 10%, 15-year bonds with a par value of $240,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 14%, which implies a selling price of 751⁄4. The effective interest method is used to allocate interest expense. 1. What are the issuer’s cash proceeds from issuance of these bonds? 2. What total amount of bond interest expense will be recognized over the life of these bonds? 3. What amount of bond interest expense is recorded on the first interest payment date?