On the last day of its fiscal year ending December 31, 2024, the Boatright Ship Builders completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. Boatright issued 8.00% stated rate bonds with a face amount of $216 million. The bonds mature on December 31, 2041 (20 years). The market rate of interest for similar bond issues was 10.00% (5.00% semiannual rate). Interest is paid semiannually (4.00%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 10 annual lease payments of $53,200 beginning on January 1, 2025. Lease B also is for 10 years, beginning January 1, 2025. Terms of the lease require seven annual lease payments of $64,800 beginning on January 1, 2028. Accounting standards require both leases to be recorded as liabilities for the present value of the scheduled payments. Assume that an 10.00% interest rate properly reflects the time value of money for the lease obligations.

On the last day of its fiscal year ending December 31, 2024, the Boatright Ship Builders completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. Boatright issued 8.00% stated rate bonds with a face amount of $216 million. The bonds mature on December 31, 2041 (20 years). The market rate of interest for similar bond issues was 10.00% (5.00% semiannual rate). Interest is paid semiannually (4.00%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 10 annual lease payments of $53,200 beginning on January 1, 2025. Lease B also is for 10 years, beginning January 1, 2025. Terms of the lease require seven annual lease payments of $64,800 beginning on January 1, 2028. Accounting standards require both leases to be recorded as liabilities for the present value of the scheduled payments. Assume that an 10.00% interest rate properly reflects the time value of money for the lease obligations.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 3P

See similar textbooks

Similar questions

Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
On January 1, a company issued a 5-year $100,000 bond at 6%. Interest payments on the bond of $6,000 are to be made annually. If the company received proceeds of $112,300, how would the bonds issuance be quoted? A. 1.123 B. 112.30 C. 0.890 D. 89.05
Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
Naval Inc. issued $200,000 face value bonds at a discount and received $190,000. At the end of 2018, the balance in the Discount on Bonds Payable account is $5,000. This years balance sheet will show a net liability of ________. A. $200,000 B. $180,000 C. $195,000 D. $205,000