Bhadiben On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,000 and a coupon rate of 7 percent. The bondsmature in 10 years and pay interest annually on December 31. Barnett uses the effective-interest amortization method. Ignore any taxeffects. Each case is independent of the other cases. (FV of $1, PV of $1, FVA of $1, and PVA of $1)Required:1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued.Note: Use appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar amount.Case A (7 percent) Case B (8 percent)Case C (6 percent)a. Cash received at issuanceb. Interest expense recorded in Year 1c. Cash paid for interest in Year 1d. Cash paid at maturity for bond principal

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Answered: On January 1 of this year, Barnett…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1 of this year, Barnett Corporation sold bonds with a face value of $510,000 and a coupon rate of 5 percent. The bonds mature in 20 years and pay interest annually on December 31. Barnett uses the effective-interest amortization method. Ignore any tax effects. Each case is independent of the other cases. Required: 1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued. Case A (5 percent) Case B (6 percent) Case C (4 percent) a. Cash received at issuance b. Interest expense recorded in Year 1 c. Cash paid for interest in Year 1 d. Cash paid at maturity for bond principal ]\
On January 1 of this year, Barnett Corporation sold bonds with a face value of $500,500 and a coupon rate of 6 percent. The bonds mature in 12 years and pay interest annually on December 31. Barnett uses the effective-interest amortization method. Ignore any tax effects. Each case is independent of the other cases. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answers to whole dollars.) Required: 1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued. a. b. C. d. Cash received at issuance Interest expense recorded in Year 1 Cash paid for interest in Year 1 Cash paid at maturity for bond principal Case A (6%) $ 500,500 $ Case B (7%) 438,658 $ 30,030 x $ IS 30,030 $ 30,030 $ 30,030 $ $ 500,500 $ 500,500 $ s Case C (5%) 546,346 30,030 30,030 500,500
Williams Company issued $600,000 of 10%, 5-year bonds. Interest is paid semiannually, and the straight-line method is used for amortization. Assume that the market rate for similar investments is 12% and the bonds are issued on an interest date. What amount was received for the bonds? (round to nearest dollar) PRESENT VALUE OF $1 If n=5 and interest = 10%, then use the factor 0.62092 %3D But, if n=10 and interest = 6%, then use the factor 0.55839 %3D PRESENT VALUE OF ANNUITY $1 If n=5 and interest = 10%, then use the factor 3.79079 But, if n=10 and interest = 6%, then use the factor 7.36009 %3D O $486,276 O $600,000 O $630,000 O $555,837
Gold Corp. uses the amortized cost method (effective interest method) when accounting for debt investments. During the year, it purchased$140,000of 4-year,8%bonds, when the market interest rate was10%. 1. Calculate the price of the bond. Assume the bonds paid interest annually. 2. Record the purchase of the bonds on July1,2021. And accrual of interest on December 31, 2021. And receipt of interest on July 1, 2022. 3 What is the bond's carrying value on December31,2022?
On January 1 of this year, Diego Corporation sold bonds with a face value of $530,000 and a coupon rate of 5 percent. The bonds mature in 10 years and pay interest annually on December 31. Diego uses the effective-interest amortization method. Ignore any tax effects. Each case is independent of the other cases. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Required:1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued. Case A (5 percent) Case B (7 percent) Case C (4 percent) a. Cash received at issuance b. Interest expense recorded in Year 1 c. Cash paid for interest in Year 1 d. Cash paid at maturity for bond principal
A corporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? Select one: a. The amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. b. The amount of the annual interest expense gradually decreases over the life of the bonds. c. The amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. d. The bonds will be issued at a premium.
n Jan.1 of this year Barnett Cop. sold bonds with a face value of $506,000 and a coupon rate of 7%. The bonds mature in 10 years and pay interest annually on December 31. Barnett uses the effective interest amortization method. Ignore any tax effects. complete the following table. a. cash received at issuance- Case A-7%; Case B- 8%; Case C 6%.---b. Interest expense recorded in year 1- Case A-7% ; Case B - 8%; Case C-6%; c. Cash paid for interest in year 1- Case A 7%; Case B 8%; Case C 6% and d.- Cash paid at maturity for bond principle Case A -7% Case B 8% and Case C 6%
Renfro Company issued $300,000 of 8%, 10-year bonds at 102. Interest is paid annually, and the straight-line method is used for amortization. Assume that the market rate for similar investments is 7%. The bonds are issued on the date of the bonds. a. What amount was received for the bonds? b. How much interest is paid each interest period? c. What is the premium amortization for the first interest period?
On January 1, Year 1, Hanover Corporation issued bonds with a $56,500 face value, a stated rate of interest of 9%, and a 5-year term o maturity. The bonds were issued at 99. Hanover uses the straight-line method to amortize bond discounts and premiums. Interest is payable in cash on December 31 each year. How much interest expense will Hanover report on its income statement on December 31, Year 1? Multiple Choice O оо $113 $5,198 $5,085 $565
On January 1, 2021, Kaye Ltd. purchased $250,000 of Danford Co.'s 4%, 8-year bonds. The market rate was 5%, and Kaye purchased the bonds for $233,681. The bonds pay interest semi-annually, on June 30 and December 31. Kaye uses the amortized cost model and the effective-interest method to recognize interest income on bond investments. Rounding values to the nearest dollar (if necessary), the entry to recognize receipt of the December 31, 2021 interest payment will include: Question 1 options: DR Cash $5,863 DR Cash $5,842 CR Interest income $5,842 CR Interest income $5,863
On January 2, 2020, a calendar-year corporation sold 4% bonds with a face value of $2640000. These bonds mature in five years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for $2415000 to yield 6%. Using the effective-interest method of computing interest, how much should be charged to interest expense in 2020? $144900. $105600. $158400. $145490.
On July 1, 2002, Roger Co. paid P1,198,000 for 10% 20-year bonds with a face amount of P1,000,000. Interest is paid on December 31 and June 30. The bonds were purchased to yield 8%. Roger uses the effective interest method to recognize interest income from investment. What should be reported as carrying amount of the bonds in Roger’s December 31, 2002 balance sheet? P1,207,000 P1,198,000 P1,195,920 P1,193,050

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