Swifty Co. is building a new hockey arena at a cost of $2,600,000. It received a downpayment of $460,000 from local businesses tosupport the project, and now needs to borrow $2,140,000 to complete the project. It therefore decides to issue$2,140,000 of 12.0%, 10-year bonds. These bonds were issued on January 1, 2024, and pay interest annually on each January 1. Thebonds yield 11%.Click here to view factor table.(a)Prepare the journal entry to record the issuance of the bonds on January 1, 2024. (Round present value factor calculations to 5decimal places, e.g. 1.25124 and the final answer to 0 decimal places, e.g. 58,971. If no entry is required, select "No Entry" for the accounttitles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.List all debit entries before credit entries.)DateJanuary 1,2024Account Titles and ExplanationCashBonds PayablePremium on Bonds PayableDebitCreditIII

Bonds serve as an important source of financing for organizations and provide investors with a…

wifty Co. is building a new hockey arena at a cost of upport the project, and now needs to borrow $2,140 2,140,000 of 12.0%, 10-year bonds. These bonds we monds yield 11%. Click here to view factor table.

wifty Co. is building a new hockey arena at a cost of upport the project, and now needs to borrow $2,140 2,140,000 of 12.0%, 10-year bonds. These bonds we monds yield 11%. Click here to view factor table.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Solve the question (part d and e only) step-by-step with comprehensive explanation where required.
H5. Smith Development Co. contracted a 30-year FRM loan with monthly amortization of $1.5 million at an interest rate of 13% five years ago. John Smith, a partner, just talked to a loan officer and learned that he can refinance the current balance on the loan at interest rate of 12% for a FRM amortized over 25 years. However, he also estimated the total refinancing cost to be $50,000. If Smith Development Co. holds the mortgage debt for 25 more years, would you recommend them to refinance? What if it holds for three years?
Kids Hospital needs to raise $100 million to pay for a new addition to its children’s rehabilitation unit. Kids planned to sell an issue of 20-year bonds that will pay interest twice each year with a coupon rate of interest of 6.25%. Between the time they printed the bonds with the 6.25% coupon rate and the date they were sold, interest rates rose from 6.25% to 6.5%. How much will they receive when they issue the bonds?
ReNew Corporation raises funds to build renewable energy systems by issuing 3-year bonds with a coupon rate of 6% and a face value of $1,300. Assume that the market interest rate for a 3-year bond issued by a firm like ReNew is currently the same as the coupon rate. The price of each of these bonds is Suppose that the market interest rate for bonds that are similar to the ReNew bond has increased to 8%. The price of the ReNew bond changes to
On January 1, 2021, Frontier World issues $39.3 million of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride. 2-a. If the market rate is 7%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place. Round your final answers to the nearest whole dollar.) Bond Characteristics Amount Face amount $39,300,000 Interest payment Periods to maturity Market interest rate Issue price 2-b. The bonds will issue atmultiple choice A Discount A Premium Face amount
KatyDid Clothes has a $110 million (face value) 25-year bond issue selling for 102 percent of par that carries a coupon rate of 8 percent. paid semiannually What would be Katydid's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt %
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 9 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
The Mossman Castle Hill has a $19 million bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at 10 percent, the interest rates on similar issues have declined to 8.6 percent. The bonds were originally issued for 20 years and have 10 years remaining. The new issue would be for 10 years. There is a 10 percent call premium on the old issue. The underwriting cost on the new $18,000,000 issue is $530,000, and the underwriting cost on the old issue was $380,000. The company is in a 35 percent tax bracket, and it will use an 8 percent discount rate (rounded after-tax cost of debt) to analyse the refunding decision. Should the old issue be refunded with new debt? (Follow the steps from the textbook example!) Skip Start Solving
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1) On January 1, 2021, Frontier World issues $39.4 million of 9% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride. 2-a. If the market rate is 10%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place. Round your final answers to the nearest whole dollar.) Bond Characteristics Amount Face amount $39,400,000 Interest payment Periods to maturity Market interest rate Issue price 2-b. The bonds will issue at A Discount A Premium Face amount 3)[On November 1, 2021, Aviation Training Corp. borrows $40,000 cash from Community…
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 14 percent and a maturity of 10 years. The investors require a rate of return of 9 percent. a. Compute the market value of the bonds b. What will the net price be if flotation costs are 10.5 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds? d. What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 21 percent? e. Rework the problem as follows: Assume a coupon rate of 8 percent. f. What effect does changing the coupon rate have on the firm's after-tax cost of capital? Why is there a change? GUD a. If the bond's annual coupon rate is 14%, what is the market value of the bond? (Round to the nearest cent.) b. What will the net price be if flotation costs are 10.5 percent of the market price? (Round to…
Click here to view the factor table. https://education.wiley.com/content/Kieso_Intermediate_Accounting_17e/media/simulations/interest_rate_tables.pdf