What is the remaining balance after the first 4 years? iv. (Ch. 12) Sandi & Co. sold/issued $200,000 of 5-year bonds on January 1, 2017 promising to pay an 8% annual interest rate with payments every 6 months (semiannually) until the date of maturity. At the time of the sale the prevailing interest rate in the open market was 10%. Sandi & Co. amortizes discounts/premiums on bonds payable using the effective interest method. a. Calculate the amount of cash that was received by Sandi & Co. on January 1, 2017. b. Prepare an amortization schedule showing the life-cycle of the bond (all 5 years). The schedule should show all of the following: # of periods, Beginning balance (carrying value right before each payment is made), interest rate, TIME, calculated interest expense for that period, total cash payment for each payment, amortization of premium/d iscount with each payment, balance of bond payable account after each payment, balance of premium/discount on bonds payable after each payment, and the carrying value after each payment. The schedule should also show the total cash paid out for all 10 payments, including the principal paid back at maturity. c. Clearly answer the following questions in written format: i. What is the total interest expense that Sandi & Co. will recognize over the life of the bond? ii. What is the beginning discount/premium on the date the bond is issued? iii. What is the ending discount/premium after the last semi-annual payment is made, but before the face value is paid? iv. What is the total amount of cash paid in semiannual payments over the life of the bond? v. What is the amount of cash paid to bondholders on the maturity date, not including any semi-annual payments?
What is the remaining balance after the first 4 years? iv. (Ch. 12) Sandi & Co. sold/issued $200,000 of 5-year bonds on January 1, 2017 promising to pay an 8% annual interest rate with payments every 6 months (semiannually) until the date of maturity. At the time of the sale the prevailing interest rate in the open market was 10%. Sandi & Co. amortizes discounts/premiums on bonds payable using the effective interest method. a. Calculate the amount of cash that was received by Sandi & Co. on January 1, 2017. b. Prepare an amortization schedule showing the life-cycle of the bond (all 5 years). The schedule should show all of the following: # of periods, Beginning balance (carrying value right before each payment is made), interest rate, TIME, calculated interest expense for that period, total cash payment for each payment, amortization of premium/d iscount with each payment, balance of bond payable account after each payment, balance of premium/discount on bonds payable after each payment, and the carrying value after each payment. The schedule should also show the total cash paid out for all 10 payments, including the principal paid back at maturity. c. Clearly answer the following questions in written format: i. What is the total interest expense that Sandi & Co. will recognize over the life of the bond? ii. What is the beginning discount/premium on the date the bond is issued? iii. What is the ending discount/premium after the last semi-annual payment is made, but before the face value is paid? iv. What is the total amount of cash paid in semiannual payments over the life of the bond? v. What is the amount of cash paid to bondholders on the maturity date, not including any semi-annual payments?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 15MCQ
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I need help with all of question 2.
Transcribed Image Text:What is the remaining balance after the first 4 years?
iv.
(Ch. 12) Sandi & Co. sold/issued $200,000 of 5-year bonds on January 1, 2017 promising to pay an 8% annual
interest rate with payments every 6 months (semiannually) until the date of maturity. At the time of the sale
the prevailing interest rate in the open market was 10%. Sandi & Co. amortizes discounts/premiums on
bonds payable using the effective interest method.
a. Calculate the amount of cash that was received by Sandi & Co. on January 1, 2017.
b. Prepare an amortization schedule showing the life-cycle of the bond (all 5 years). The schedule
should show all of the following: # of periods, Beginning balance (carrying value right before each
payment is made), interest rate, TIME, calculated interest expense for that period, total cash
payment for each payment, amortization of premium/d iscount with each payment, balance of
bond payable account after each payment, balance of premium/discount on bonds payable after
each payment, and the carrying value after each payment. The schedule should also show the total
cash paid out for all 10 payments, including the principal paid back at maturity.
c. Clearly answer the following questions in written format:
i. What is the total interest expense that Sandi & Co. will recognize over the life of the bond?
ii. What is the beginning discount/premium on the date the bond is issued?
iii. What is the ending discount/premium after the last semi-annual payment is made, but
before the face value is paid?
iv. What is the total amount of cash paid in semiannual payments over the life of the bond?
v. What is the amount of cash paid to bondholders on the maturity date, not including any
semi-annual payments?
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