To calculate the price of the bond

Assignment Help Accounting Basics
Reference no: EM13318398

On July 1, 2008 bonds of 4,000,000 face value of 13%, 20 year bonds are issued to yield 11%. Interest is paid semiannually on January 1 and July 1 and the effective interest method is used.

Required:

1. All entries from the issuance date through 12-31-09. Assume reversing entries are used.
2. The proper balance sheet presentation for the bonds payable at 12/31/09.
3. Answers to the following questions:
a. What amount of interest expense will be reported for 2009?
b. Will the bond interest expense reported in 2009 be the same as, greater than, or less than the amount that would be reported if the straight line method of amortization were used?
c. Determine the total cost of borrowing over the life of the bond.
d. Will total bond interest expense for the life of the bond be greater than, or less than the amount that would be reported if the straight line method of amortization were used?

Note: To calculate the price of the bond you will need PV factors for 5.5% for 40 semi-annual periods. You can easily figure them out either using the formulas underlying the PV factors in the ch. 6 tables or doing the PV calc in excel. But to make your life a little easier, here are the factors:

The single sum factor is 0.11746314 and the ordinary annuity factor is 16.0461247

Given the length of the bond and it being semiannual interest, it would be useful to put together an excel sheet to do the effective interest amtz chart and see if things work out after 40 rows.

Reference no: EM13318398

Questions Cloud

Site annual fixed cost variable cost per auto produced : Audi Motors is considering three sites – A, B, and C, at which to locate a factory to build it’s new model automobile, the Audi SUV XL500. The goal is to locate at a minimum cost site, where cost is measured by the annual fixed plus variable costs of..
Find how high the small ball bounces if its mass is m : When the larger ball hits the ground and then collides with the smaller ball, it causes the small ball to bounce to a height several times greater than that from which the balls were originally released.
What is its amplitude if they interfere destructively : Two waves with identical frequency but different amplitudes A1 = 6.0 cm and A2 = 3.0 cm, What is its amplitude if they interfere destructively
Find what is the total linear impulse acting on the bullet : The force of the expanding gases on a 0.02 kg bullet is given by f=f0-f.1*t . Initially stationary at x=0 , the bullet reaches a speed of 1000 kph by the time it exits the gun. f0 = 7000 N and f1=2.9*106 N/s.
To calculate the price of the bond : To calculate the price of the bond you will need PV factors for 5.5% for 40 semi-annual periods. You can easily figure them out either using the formulas underlying the PV factors in the ch. 6 tables or doing the PV calc in excel. But to make..
What is meant by designing products for production : What is meant by designing products for production or manufacturability? What is the most important factor in taking this approach to product design?
Explain nitrogen gas is released from the decomposition : Assuming that one mole of NaN3 produces one mol of N2, what volume, in liters, of nitrogen gas is released from the decomposition of 1.88 g sodium azide? The pressure is 755 torr and the temperature is 24 degrees C.
What are the lowest three standing wave frequencies : A string 2.0 m long is held fixed at both ends. If a sharp blow is applied to the string at its center, What are the lowest three standing wave frequencies for this string
What percentage decline in earningsbefore interest and taxes : Natural Selection's liabilities-to-equity ratio Times interest earned ratio Times burden covered What percentage decline in earnings before interest and taxes could Natural Selection have sustained before failing to cover: Interest payment req..

Reviews

Write a Review

Accounting Basics Questions & Answers

  Weighted average rate for the year

Darron Co. was formed on January 1, 2011 as a wholly owned foreign subsidiary of a U.S. corporation. Darron's functional currency was the stickle (§). The following transactions and events occurred during 2011:

  Determining after-tax yield to maturity

If the investor holds the bond until it matures and collects the $1,000 par value from the Treasury and his marginal tax rate is 28 percent, what will his after-tax yield to maturity be?

  Applying the lcm rule to ending inventory

Required-What unit values should Herman use for each of its products when applying the LCM rule to ending inventory?

  Internal control activity

Which of the following is an internal control activity that could prevent a paid disbursement voucher from being presented for payment a second time?

  Amount of overhead cost

The amount of overhead cost that the company applied to work in process for October was:

  Economic entity concept

Under the economic entity concept, which of the following statements is true?

  What is the amount of citradoria corporation allowable

What is the amount of Citradoria Corporation's allowable deduction for charitable contributions for the current year?

  How is she taxed on the distribution

Lark Corporation is a calendar year taxpayer. At the beginning of the current year, Lark has accumulated E & P of $330,000. The corporation incurs a deficit in current E & P of $460,000 that accrues ratably throughout the year. On June 30, Lark di..

  How do the transactions in the divorce agreement affect

Transfer title of their personal home to Barbara. They purchased the house in 1998 and their basis today is $400,000. The fair market value of the house is $500,000. The house is subject to a 25-year, $250,000 mortgage.

  Financial statement analysis

ACCT212 Project 2: Financial Statement Analysis-YUM! Brands, Inc.  Description: Using the financial statements for YUM! Brands, Inc. located in Appendix A of your Textbook, you will calculate Vertical and Horizontal Analysis and the Financial Ratios ..

  Computing equivalent production

Computing equivalent production

  Information about earning per share

For 2010, Skresso Co. reported $3.64 of earnings per share of common stock. During 20011 the firm had a 4% common stock dividend.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd