Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 14, Problem 14.4BE
Determining the price of bonds
• LO14–2
A company issued 5%, 20-year bonds with a face amount of $100 million. The market yield for bonds of similar risk and maturity is 4%. Interest is paid semiannually. At what price did the bonds sell?
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PB2. LO 13.1 Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity date.
Interest is to be paid semi-annually and the market rate of interest is 8%. If the bonds sold at 113.55, what amount was
received upon issuance?
Use the following to answer questions 11 – 15
AL issues 4.0%, 20-year bonds with a face amount of
$1,000,000 for $986,529.23. The market interest rate for
bonds of similar risk and maturity is 4.1%. Interest is paid
annually.
11.
$.
Determine the interest
payment.
12.
$
(rounded to nearest dollar).
Determine interest expense for the first interest
payment.
What will happen to interest expense each interest
payment? (Increase, decrease, remain constant)
13.
What will happen to the bond liability (carrying
value) each interest payment? (Increase, decrease, remain
constant).
14.
How much will the company pay out
$
when the bonds mature in 20 years (assume all interest
payments have already been paid)?
15.
C20
fx
A
В
C
On January 1, Ruiz Company issued bonds as follows:
3
4
Face Amount:
$500,000
5
Number of Years:
15
Stated Interest Rate:
7%
7
Interest payments per year
2
8.
9.
Required:
10 1) Calculate the bond selling price given the two market interest rates below.
11
Use formulas that reference data from this worksheet and from the appropriate future or present value tables (found by clicking the tabs at the bottor
12 this worksheet).
13
Note: Rounding is not required.
14
15
a)
Annual Market Rate
9%
16
Semiannual Interest Payment:
$17,500
17
PV of Face Amount:
18
PV of Interest Payments:
19
Bond Selling Price:
0.00
20
21
b)
Annual Market Rate
6.00%
22
Semiannual Interest Payment:
$17,500
23
PV of Face Amount:
24
PV of Interest Payments:
25
Bond Selling Price:
%3D
26
A Future Value of Annuity of $1
A Present Value of Annuity of $1
A Graded Worksheet
II
Chapter 14 Solutions
Intermediate Accounting, 10 Ed
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10QCh. 14 - When a notes stated rate of interest is...
Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Prob. 14.22ECh. 14 - Prob. 14.36ECh. 14 - Prob. 14.14PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.21PCh. 14 - Prob. 14.3DMP
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