EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 6, Problem 17P
Summary Introduction
To determine: The amount paid for bonds.
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Krystian Inc. issued 12-year bonds with a face value of $110,000 and a stated rate of 5% when the market rate was 7%. Interest was paid semi-annually.
A. Calculate the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. NOTE: The requirement is referring to total interest and principal.
B. Would an investor be willing to pay more or less than face value for this bond?
Less than
The following information applies to the questions displayed below.] Serotta Corporation is planning to issue bonds with
a face value of $300,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly
every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year.
Serotta uses the effective-interest amortization method and does not use a premium account. Assume an annual
market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from
the tables provided.
Serotta Corporation is planning to issue bonds with a face value of $460,000 and a coupon rate of 8 percent. The bonds
mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds
were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium
account. Assume an annual market rate of interest of 4 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the
appropriate factor(s) from the tables provided.)
1. Provide the journal entry to record the issuance of the bonds January 1. (If no entry is required for a transaction/event, select "No
journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)
View transaction list
Journal entry worksheet
1
>
Record the issuance of the bonds on January 1.
Note: Enter debits before credits.
Date
General Jounral
Debit
Credit
January 01
Chapter 6 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 6 - Prob. 1QTDCh. 6 - Prob. 2QTDCh. 6 - Prob. 3QTDCh. 6 - Prob. 4QTDCh. 6 - Prob. 5QTDCh. 6 - Prob. 6QTDCh. 6 - Prob. 7QTDCh. 6 - Prob. 8QTDCh. 6 - Prob. 9QTDCh. 6 - Prob. 11QTD
Ch. 6 - Prob. 12QTDCh. 6 - Prob. 13QTDCh. 6 - Prob. 14QTDCh. 6 - Prob. 15QTDCh. 6 - Prob. 16QTDCh. 6 - Prob. 17QTDCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27P
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- Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?arrow_forwardThe Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued. i.e. they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000 and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must the company issue to raise $2,000,000 cash?arrow_forwardSerotta Corporation is planning to issue bonds with a face value of $440,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 1. Provide the journal entry to record the issuance of the bonds January 1.arrow_forward
- Denzel Corporation is planning to issue bonds with a face value of $600,000 and a coupon rate of 7.5 percent. The bonds mature in four years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Denzel uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent (FV of $1. PV of $1. FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. 3. What bonds payable amount will Denzel report on its June 30 balance sheet? Complete this question by entering your answers in the tabs below. Required 1 and 2 Required 3 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal…arrow_forwardABC Corp. issued 8-year bonds a year ago. The bonds make semiannual payments. The YTM (yield to maturity) on the bonds when issued at par was 8%. ABC issued 12,561 bonds and will face a total repayment of $26,126,880 when the bonds mature. If the YTM on these bonds is 6.1%, what is the current bond price?arrow_forwardOn July 1, Somers Inc. issued $300,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. A. Assuming the bonds sold at 64.55, what was the selling price of the bonds? B. Explain why the cash received from selling this bond is different from the $300,000 face value of the bond. Investors can earn a in other similar bonds so the bond sells at aarrow_forward
- Denzel Corporation is planning to issue bonds with a face value of $750,000 and a coupon rate of 7.5 percent. The bonds mature in 4 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Denzel uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. Required: 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. 3. What bonds payable amount will Denzel report on its June 30 balance sheet?arrow_forwardOn July 1, Somers Inc. issued $300,000 of 12%, 10-year bonds when the market rate was 14%. The bonds paid interest semi-annually. A. Assuming the bonds sold at 59.55, what was the selling price of the bonds? $ B. Explain why the cash received from selling this bond is different from the $300,000 face value of the bond. Investors can earn a higher rate/lower rate? in other similar bonds so the bond sells at a Premium/discount?arrow_forwardStanley, Inc. issues 20-year $1,000 bonds that pay $80 annually. The market price for the bonds is $909. The market's required yield to maturity on a comparable-risk bond is 9 percent. a. What is the value of the bond to you? b. What happens to the value if the market's required yield to maturity on a comparable-risk bond (i) increases to 12 percent or (ii) decreases to 7 percent? c. Under which of the circumstances in part b should you purchase the bond?arrow_forward
- warded Denzel Corporation is planning to issue bonds with a face value of $630,000 and a coupon rate of 7.5 percent. The bonds mature in 4 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Denzel uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. 3. What bonds payable amount will Denzel report on its June 30 balance sheet?arrow_forwardOn July 1, Somers Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12 %. The bonds paid interest semi-annually. A. Assuming the bonds sold at 59.55, what was the selling price of the bonds? B. Explain why the cash received from selling this bond is different from the $200,000 face value of the bond. Investors can earn a higher rate ✓ in other similar bonds so the bond sells at a discountarrow_forwardWildhorse Co. is about to issue $329,900 of 6-year bonds paying an 11% interest rate, with interest payable semiannually. The discount rate for such securities is 10%.Click here to view the factor table.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)How much can Wildhorse expect to receive for the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,575.)arrow_forward
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