What are the interest expense and the present value

Assignment Help Accounting Basics
Reference no: EM132657583

Question - On January 1, 2018, Green Pea Corp. issued $100 million of its 8%, 10-year bonds for $87.55 million (note: this is the present value of the bonds on 1/1/2018). The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Green Pea Corp. records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $83 million as determined by their market value in the over-the-counter market. Below is a partial discount amortization table for this bond:

Date

Cash Paid

Interest Expense

Discount Amortization

Present Value of the Bonds

1/1/18

 

 

 

87,550,000

6/30/18

4,000,000

4,377,500

377,500

87,927,500

12/31/18

4,000,000

?

?

?

Using the effective-interest method, what are the interest expense and the present (or book) value of the bonds on 12/31/2018, respectively?

a. $4,377,500 and $88,305,000, respectively

b. $4,377,500 and $87,549,500, respectively

c. $4,396,375 and $88,323,875, respectively

Reference no: EM132657583

Questions Cloud

What physical evidence would be retrieved from crime scene : After 10 years of being free, a man was convicted of a rape after DNA evidence was allowed to be used. The female he raped was not able to make.
What is the current price of the bond-blue lake corp : The current interest rate on this type of bond is 6.56 percent, compounded annually. What is the current price of the bond? Round the answer to two decimal plac
How much would you gain through arbitrage : If you begin by holding £1, how could you profit from these exchange rates? How much would you gain through arbitrage? Show process to receive partial credits.
What projected inventory at the end of december is : Find Projected sales discounts to be taken by customers making remittance during February? Projected inventory at the end of December is
What are the interest expense and the present value : Using the effective-interest method, what are the interest expense and the present (or book) value of the bonds on 12/31/2018, respectively
What is the present value of cash flows : Consider a growing annuity which will last for 30 years. The first payment will occur three years from today and you will receive $500.
Stock price according to the constant growth dividend model : What is the stock price according to the constant growth dividend model?
Journalize the entries for the preceding transactions : Journalize the entries for the preceding transactions. For purposes of this case study it is not necessary to transfer direct material and direct labor
How the federal reserve can affect the interest rate : What soft economic data has created uncertainty inside the Federal Reserve about starting to raise short-term interest rates as early as June?

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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