Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Textbook Question
Chapter 7A, Problem 2YT
Suppose Action Company issues a $1,000, 10-year, 11.5% bond with interest payable annually at a time when the market interest rate is 12%. What are the proceeds—cash received by Action Company—from this bond issue?
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2. 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?
Bond Issuance.
Sander Corporation issues a P300,000, 16 percent, 10-year bond at 108.
REQUIREMENTS:
(a) What is the maturity value?
(b) What is the annual cash interest payment?
(c) What are the proceeds the company receives upon issuance of the bond?
(d) What is the amount of the premium?
(e) What is the annual premium amortization?
2. DEF Company will issue $8,000,000 in 10%, 10-year bonds when the market
rate of interest is 7%. Interest is paid semiannually.
Required:
a. Will this interest structure result in a Premium for DEF company or a Discount?
b. How much cash will be received from the issuance of the bond?
c. How much will the semi-annual interest payment be on the bond?
Chapter 7A Solutions
Financial Accounting
Ch. 7A - Prob. 1YTCh. 7A - Suppose Action Company issues a 1,000, 10-year,...Ch. 7A - Suppose HPS Company issues a 1,000 face value,...Ch. 7A - Present value. (LO 8). Suppose you want to have...Ch. 7A - Present value. (LO 8). Able Company has offered to...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Prob. 5PACh. 7A - Prob. 6PB
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- The question that says “a $4000, 6% bond is sold at 93. When the bond is issued, the cash account will be increased by:arrow_forwardKrystian 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. X B. Would an investor be willing to pay more or less than face value for this bond? Less thanarrow_forwardAtom Endeavour Co. Issued $27 million face amount of 5.6% bonds when market Interest rates were 6.24% for bonds of similar risk and other characteristics. Required: a. How much Interest will be paid annually on these bonds? (Enter your answer in dollars, not millions of dollars, 1.e. 1,234,567.) Annual interest payment b. Were the bonds issued at a premium or discount? O Premium O Discount c. Will the annual Interest expense on these bonds be more than, equal to, or less than the amount of Interest paid each year? O Interest expense will be less than the Interest paid. O Interest expense will be more than the Interest paid. O Interest expense will be equal to the Interest paid.arrow_forward
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