Animal World issues ten-year bonds at their face amount of $100 million with the option to call the bonds at $102 million. Two years later, interest rates have decreased and Animal World decides to call the bonds. The company estimates that over the next eight years, they will save $16 million of cash interest. The journal entry to retire the bonds will include a: Multiple Choice Gain of $16 million. Loss of $2 million. Gain of $14 million
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- Butler, Inc. paid $90,000 to retire a note with a face value of $99,600 . The note was issued with an 8% coupon rate paid semiannually. The note was three years from maturity and had a net book value of $81,840 . What is the net gain or loss on the redemption of the note? Select one: a. $9,600 loss b. $9,600 gain c. $8,160 gain d. $8,160 loss e. None of these are correct.Kiss Greetings planned to raise $500,000 by issuing bonds. The bond certificates were printed bearing a stated interest rate of 6%, which was equal to the yield rate of interest. However, before the bonds could be issued, economic conditions forced the yield rate up to 7%. If the life of the bonds is 10 years and interest is paid annually on December 31, how much will the company receive from the sale of the bonds? Group of answer choices Less than $500,000 because the 7% yield rate of interest was higher than the stated rate. The 6% bonds will not be sold at all. The company will be required to have the certificates reprinted bearing the new yield rate of 7%. Exactly $500,000 because the company would still pay interest at the stated rate. More than $500,000 because the 6% stated rate of interest was less than the yield rate.On April 1, 20-1, Rebound Co. issued $300,000 of 10%, 10-year bonds, callable at 105 after three years, at face value. On April 1, 20-4, after completing three years of interest payments on the bonds, Rebound is considering calling the bonds and issuing $300,000 of new 8%, 10-year bonds at face value. The current market interest rate is only 8%, so Rebound thinks it might save money by taking this action.
- Supper Accountants Inc plans to sell a bond to finance its plant. The face value of the bond is $100,000 and it will be due in 5 years. The bond is offered at 6% annual interest rate, although the market rate is 7%. Supper Accountants is expected to receive $95,900 in cash when the sales is completed. How much interest expense should Supper Accountants record for the first year? 6,000 5,754 7,000 6.173Mark Motel's debt has a face value of $40 million, a coupon rate of 14% (paid semiannually), and expires in 12 years (at t = 12 . The current annual yield-to-maturity (stated) for all bonds of the company is 15%. Mark wishes to conserve cash for the next few years. To do this, Mark decides to issue new equity and use the proceeds to purchase the existing debt at the market price. The current stock price of Mark is $60 and there are 2 million shares outstanding. 1. How many shares should Mark issue to purchase the existing debt? Assume the decision to purchase the bond does not change the stock price. Instead, the company decides to issue a zero-coupon bond that matures at year 5, and use the proceeds to purchase the existing debt at the market price. 2. What is the face value of the zero-coupon bond that Mark needs to issue?On July 1, 2012, Insta Inc. issues $3,000,000 face value seven-year bonds with annual interest payments of $150,000 to be paid each June 30. The market interest rate is 7.5%. According to the effective interest rate method of amortization, Insta is most likely to report: Choose an option: i) an interest expense of $150,000 in the June 30, 2013 income statement. ii) a cash inflow of $195,207 from operating activities in the June 30, 2013 statement of cash flow. iii) a liability of $2,647,962 in the June 30, 2013 balance sheet.
- Assume that Riverbed Inc. invests in a bond for $120,000. The bond was purchased at par and is accounted for using amortized cost. At year end, management has determined that there is no significant increase in credit risk, but that there is a 4% chance that the company will not collect 14% of the face value of the bond (which also represents the present value of the bond) in the next 12 months. The expected loss model is used.Prepare the required year-end journal entry. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit CreditCross Country Railroad Co. is about to issue $100,000 of 10-year bonds that pay a 5.5% annual interest rate, with interest payable semi-annually. The market interest rate is 5%. How much can Cross Country expect to receive for the sale of these bonds? To calculate, use (a) the present value tables, (b) a financial calculator, or (c) Excel function PV. (Unknown Rate) HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $4,000 down payment and signed a note that calls for 36 payments of $1,033.34 at the end of each month. The stated rate of interest in the note is 4%. As an incentive for entering into the contract, Trans has agreed to forgive the first two payments under the lease.InstructionsWhat was the purchase price of the used truck excluding the incentive given? To calculate, use (1) a financial calculator or (2) Excel function PV.What effect, if any, does the forgiveness of the first two payments have on the purchase price of the truck?Calculate the present value of…Metrobank made a $2,000,000, 8% loan on January 1, 2018. The $160,000 interest is receivable at the end of each year, with the principal amount to be received at the end of five years. By the end of 2018, the first year's interest of $160,000 has not been received yet because the borrower is experiencing financial troubles. The borrower negotiated a restructuring of the loan. The payment of all of the interest for 5 years will be delayed until the end of the 5 year loan term. In addition, the amount of principal repayment will be dropped from $2,000,000 to $1,200,000. The Present Value of 1 at 8% for 4 periods is .735. No interest revenue has been recognized in 2018 in connection with the loan. What is the loan impairment loss for 2018?
- On January 1, 2024, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 9% and the bonds issued at $293,938. If the market interest rate drops to 7% on December 31, 2025, it will cost $347,025 to retire the bonds. Record the retirement of the bonds on December 31, 2025.The company issues 10.0%, 10-year bonds with a total face amount of $1,000,000. The market interest rate for bonds of similar risk and maturity is 9.8%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET. 1. $ 2. $ 3. $ How much will be paid in interest each interest payment? (rounded to nearest dollar). What is the present value of the interest payments? (rounded to nearest dollar). What is the issue price of the bond?On July 1, 2012, Beta Inc. issues $3,000,000 face value seven-year bonds with annual interest payments of $150,000 to be paid each June 30. The market interest rate is 7.5%. According to the effective interest rate method of amortization, Beta is most likely to report: Select one: A. an interest expense of $150,000 in the June 30, 2013 income statement. O B. a cash inflow of $195,207 from operating activities in the June 30, 2013 statement of cash flow. C. a liability of $2,647,962 in the June 30, 2013 balance sheet.