1. How much is the estimated purchase price of the bonds on January 1, 2021? On january 1, 2021. ABC Co. contemplates on acquiring 10%, 3,000,000 bonds as investment. Principal on the bonds will mature in four semi-annual installments as followsJuly 1, 20211,200,000December 31, 2021800,000July 1, 2022December 31, 2022600,000400,000Total3,000,000Interest on the outstandinng principal balance is also due semi-annually. The effective rate as of January 1, 2021 is 8%.

The purchase price of the bond reflects the relationship between coupon interest rate and market…

Answered: How much is the estimated purchase…

Business

Finance

How much is the estimated purchase price of the bonds on January 1, 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1RE

See similar textbooks

Related questions

Q: A company issues $14900000, 5.8%, 20-year bonds to yield 6% on January 1, 2019. Interest is paid on…

A: Bonds are a form of loan or debt that is taken by the business. When bonds are being sold at a value…

Q: A bond issued by a corporation on May 1, 1999, is scheduled to mature on May 1, 2019. If today is…

A: Details given are : Bond issue date = May 1 , 1999 Bond Maturity date = May 1 , 2019 Today's date =…

Q: On January 1, 2020, MNOCompany issued its 9%, P2 million bonds, which mature on January 1, 2030. The…

Q: Green Corporation issued a P4, 000,000 of 6% bonds on May 1, 2019. The bonds were dated January 1,…

A: Interest accrued on December 31 = Face value of bonds x rate of interest x 6months / 12 months = P4,…

Q: According to the theory, premium bonds, discount bonds, and face value bonds at the expiry date will…

A: Bonds refer to borrowing security issued by the company to raise funds from the market by making an…

Q: equired: ) Determine the price of the bonds on January 1, 2024. ) By how much will ABC Company's…

A: Bond issuance date Jan,1,2024 10% Bond -$ 800000 Yield 8% Interest is payable on 30 June and 31Dec…

Q: Required: Determine the price of the bonds at January 1, 2021. (Enter your answer in whole dollars.)…

A: Issuance of bonds is one of the sources of financing, bonds are long-term debt for the company…

Q: What is the carrying amount of the bonds payable on December 31, 2020? a. 4,000,000 b. 4,500,000 c.…

A: Bonds payable are a debt instrument which are issued by the company for raising long-term capital…

Q: On January 1, 2021, XYZ Corp issued 12% bonds dated January 1, 2021, with a face amount of $20…

A: 1. Compute issue price of bonds at January 1, 2021 as shown below: Semi-annual interest rate is…

Q: How much is initial valuation of the bonds? How much cash was received upon the sale of the bonds?…

A: Accrued Interest can be defined in simple terms as an interest which has been occurred at a…

Q: Stone Energy Corporation’s 7.5% bonds due in 2022 were reported as selling for 82.95. Were the bonds…

Q: A company issues $15100000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

A: It is the financial instrument issued by the company to raise the fund for business operations.…

Q: On January 1, 2021, ABCompany issued 10% bonds dated January 1, 2021, with a face amount of $20…

A: 1. Determine the price of the bonds at January 1, 2021.

Q: On March 31, 2021, Gardner Corporation received authorization to issue $50,000 of 9 percent, 30-year…

A: Note:- Since you have posted a question with multiple sub-parts, we will solve the first three…

Q: 1. How much is the amortization of discount for 2021? 2. How much is the carrying value of the…

A: Bonds are a form of debt or liability for the business, on which regular interest payments needs to…

Q: Required: 1. Prepare journal entries relating to the bonds payable in 2020 and 2021. Straight line…

A: Bond Issue Bond can be issue either par value ,discount and premium. The purpose of issuing the…

Q: Olay Inc. issues $160,000, 8%, 10-year bonds payable on January 1, 2020. Calculate the selling price…

A: a. Compute the S.P. (selling price) of bonds at 10% as follows:

Q: Part 1 -- Bonds:1. National Company issued 7% bonds, dated January 1, with a face amount of $700,000…

A: Answer: Part 1: Price of the bond = Coupon×PVAF(r,n)+Redemption price×PVIF(r,n)=$21,000×PVIF(2.5%,…

Q: On February 1, 2021, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of…

Q: On January 02, 2020, ABC Company issued its 9% bonds in the face amount of P4,000,000 which mature…

A: solution given Face value 4000000 Issue price 3756000 Market rate of interest 10%…

Q: 4) Assume the bond is redeemed at 94 on May 1, 2022. Record the redemption of the bond with the…

A: Issue price of bonds 3255000 =3500000*0.93 Discount on issue 245000 =3500000-3255000…

Q: A company issues $14600000, 9.8%, 20-year bonds to yield 10% on January 1, 2020. Interest is paid on…

A: The carrying value of the bond using effective interest will be proceeds from the issue with…

Q: The premium on an outstanding 12% P5,000,000 bonds payable was amortized for P46,675 during 2023,…

A: Working note: Computation of interest rate:

Q: 1. What are the Harry's cash proceeds from issuance of these bonds, presuming that the selling price…

A: As the bond's quoted rate is less than the market rate the bond will be issued in discount and the…

Q: On June 30, 2021, Moran Corporation issued $13.5 million of its 6% bonds for $12.1 million. The…

Q: On January 1, 2020, ABC Company issued its 9%, P2 million bonds, which mature on January 1, 2030.…

A: Interest expense = Carrying value on Jan 1, 2020*10% Interest payment = Face value*9%

Q: at is the total carrying value of the investment in bonds at year end 2020?

A: Carrying Value: Carrying value is the measure used in accounting , in which the value of the assets…

Q: nds on July n July 1, 2021

A: a. Price of bond = [Coupon payment x PVIFA7%,30] + [Face value x PVIF7%,30] = [700000 x 6% x…

Q: Concord Corporation issues $2.30 million, 10-year, 9% bonds at 98, with interest payable each…

A: Bonds payable are one of the sources of finance and are shown as liability. If the interest rate is…

Q: Please answer following true or false with explanation i am providing 3 subparts (A) A bond was…

A: Bond is the debt to the company who has issued it, this is the instrument which is issued to the…

Q: On August 1, 2022, Bridgeport Corp. issued $483,600, 7%, 10-year bonds at face value. Interest is…

A: given that, Bridgeport Corp. issued bonds worth $483600 Rate of interest = 7% life of bond = 10…

Q: On January 1, 2021, an entity issues 9%, 3-year, P3,000,000 bonds at a price that reflects a yield…

A: Premium on Bond: It is a bond that trades at a higher price than its face value or costs more than…

Q: . Compute for the issue price of the bonds on January 1, 2019. 2. Compute for the bonds outstanding…

A: 1. There was no need of interest calculation. So, it's ignored. 2. Bonds are retired before…

Q: National Company issued 7.5% bonds, dated January 1, with a face amount of $650,000 on January 1,…

A: Answer: Part 1: Price of the bond =…

Q: On December 31, 2021, Interlink Communications issued 6% stated rate bonds with a face amount of…

A: Price of the bond: Price of the bond is the present value of the amount to be paid after end of the…

Q: On January 1, 2021, Solis Co. issued its 10% bonds in the face amount of P3,000,000, which mature on…

A: Bonds are an obligation on an entity which is to be repaid on its maturity date. These are issued…

Q: On January 1, 2020 Wolf Company issued 10% bonds in the face amount of P5,000,000, which mature on…

A: The bonds are issued on premium when market interest rate is less than the coupon rate of the bonds…

Q: 1. Downing Company issues $1,000,000, 12%, 10-year bonds on January 1, 2020. The bonds pay interest…

A: Issue price of the bond means the true/intrinsic value of the bond. In other words, it means the…

Q: A. How much are the proceeds that Shanghai Fashions Company will receive on the issue date of the…

A: A. Time Payments 0.5 325,000*0.03 =9,750 (Semiannual coupon payments) 1 9,750 1.5 9,750…

Q: On January 1, 2019, Bay Company issues bonds with a face value of $850,000 that pay 9% interest…

Q: on january 1, 2019, bay company issues bonds with a face value of $850,000 that pay 9% interest…

Q: A. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? 24 B. Were they…

A: Bonds: Bonds are defined as debt instruments which are usually issued by the company that borrows…

Q: 9. Joba Corporation issued $1,000,000 of 13% (stated rate) bonds payable on January 1, 2020, due on…

A: Issue price of the bonds = Present value of principal + Present value of interest payments = face…

Q: t December 31, 2020, Martinez Corporation has the following account balances: Bonds payable, due…

A: Bonds payable: Bonds payable is a liability to the company created upon the issue of bonds either at…

Q: Bonita Industries issues $30900000 of 10-year, 7% bonds on March 1, 2020, at 96 plus accrued…

A: Bond prices are expressed as a percentage of par:- Price of 100 means that a bond costs 100 percent…

Q: On September 31, 2021, an entity issues bonds with face amount of P8,000,000 for P9,105, 022…

A: Cash proceeds P9,105,022 Accrued Interest (P8,000,000 *9 /12 * 9%) (P540,000) Face Value of…

Q: Compute the issue price of the bonds 00.000

A: Company has different methods to finance its business, Projects. Issuing of the Bonds also is the…

Q: Temptation Vacations issues $60 million in bonds on January 1, 2021, that pay interest semiannually…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: On December 31, 2021, Interlink Communications issued 6% stated rate bonds with a face amount of…

A: Given, Stated rate = 6% Face value = $100,000,000 Market rate = 7%

Q: On August 1, 2022, Pina Colada Corp. issued $493,200, 6%, 10-year bonds at face value. Interest is…

A: As posted multiple independent questions we are answering only first question kindly repost the…

Question

1. How much is the estimated purchase price of the bonds on January 1, 2021?

On january 1, 2021. ABC Co. contemplates on acquiring 10%, 3,000,000 bonds as investment. Principal on the bonds will mature in four semi-annual installments as follows
July 1, 2021
1,200,000
December 31, 2021
800,000
July 1, 2022
December 31, 2022
600,000
400,000
Total
3,000,000
Interest on the outstandinng principal balance is also due semi-annually. The effective rate as of January 1, 2021 is 8%.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Calculation

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
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
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
Naval Inc. issued $200,000 face value bonds at a discount and received $190,000. At the end of 2018, the balance in the Discount on Bonds Payable account is $5,000. This years balance sheet will show a net liability of ________. A. $200,000 B. $180,000 C. $195,000 D. $205,000
Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.
On January 1, 2021, the company purchased 8% bonds in the face amount of P8,000,000. The bonds mature on January 1, 2026 and were purchased for P8,328,128 to yield 7%. Interest is payable annually every December 31. The business model for this investment is to collect contractual cash flows and to sell the bonds in the open market. Fair value Effective rate December 31, 2021 7,740,000 9% December 31, 2022 7,230,000 10% December 31, 2023 7,030,000 11% On December 31, 2023, the entity changed the business model to collect contractual cash flows only. On January 1, 2024, the fair of the bonds did not change. At what amount will the Financial asset-FVOCI be reclassified to Investment in bonds on January 1, 2024?
A company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2022. Interest is paid on June 30 and December 31. Te proceeds from the bonds are $14,703,120. If the straight-line method of amortization is used, what carrying value will be reported for the bonds on the December 31, 2024 balance sheet? A. $14,752,672 B. $14,955,466 C. $14,725,374 D. $14,732,808