MANAGERIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259688713
Author: Wild
Publisher: MCG
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Chapter B, Problem 12E
To determine
Concept introduction:
Time value of money: Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.
To calculate:
The total cash proceeds from bonds
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On January 1, 2024, Martin Company issued $5,000,000, 10% bonds. Interest is payable semi-annually on June 30 and December 31. The bonds mature on January 1, 2034. The bonds are sold to yield 12%.
Will the bonds be issued at a premium or discount? Explain why.
Calculate the issue price of the bonds.
Prepare the amortization table for the bonds assuming the effective interest method is used to calculate interest. You may (should) prepare the table in Excel then copy and paste into Word.
Spiller Corp. plans to issue 10%, 15-year, $500,000 par value bonds payable that pay interest semiannually on June 30 and December 31. The bonds are dated December 31, 2019, and are issued on that date. If the market rate of interest for the bonds is 8% on the date of issue, what will be the total cash proceeds from the bond issue?
On January 1, 2018, Oman Cables Industry (SAOG) issued 12% bonds dated January 1, 2018, with a principal amount of OR20 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. Note: to determine the price of bonds, you should use tables (2) present value of $1 and (4) present value of an ordinary annuity of$1 to find the appropriate P.V. factors to calculate the interest and principal. The appropriate journal entry to record interest on June 30, 2018, using the effective interest method is:
Select one:
a. Interest expense 1,124,623 Premium on bonds payable 75,377 Cash 1,200,000 O
b. Interest expense 1,102,009 Premium on bonds payable 97,991 Cash 1,200,00
c. Interest expense 1,275,377 Discount on bonds payable 75,377 Cash 1,200,000
d. Interest expense 1,128,391 Premium on bonds payable 71,609 Cash 1,200,000
Chapter B Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
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