Question

On January 1 of this year, Nowell Company issued bonds with a face value of $190,000...

On January 1 of this year, Nowell Company issued bonds with a face value of $190,000 and a coupon rate of 8.0 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. When the bonds were sold, the annual market rate of interest was 8.0 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)  

rev: 11_29_2016_QC_CS-71243

References

Section BreakP10-2 Reporting Bonds Issued at Par LO 10-2

6.

value:
10.00 points

Required information

P10-2 Part 1

Required:

1. What was the issue price on January 1 of this year?

rev: 11_29_2016_QC_CS-71243

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P10-2 Part 1Learning Objective: 10-02 Report bonds payable and interest expense for bond securities issued at par.

Check my work

7.

value:
10.00 points

Required information

P10-2 Part 2

2. What amount of interest expense should be recorded on June 30 and December 31 of this year?

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P10-2 Part 2Learning Objective: 10-02 Report bonds payable and interest expense for bond securities issued at par.

Check my work

8.

value:
10.00 points

Required information

P10-2 Part 3

3. What amount of cash is owed to investors on June 30 and December 31 of this year?

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P10-2 Part 3Learning Objective: 10-02 Report bonds payable and interest expense for bond securities issued at par.

Check my work

9.

value:
10.00 points

Required information

P10-2 Part 4

4. What is the book value of the bonds on December 31 of this year? December 31 of next year?

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Homework Answers

Answer #1

Solution 1:

As market interest rate and coupon rate are equal, therefore issue price of bonds = Par value = $190,000

Solution 2:

Amount of interest expense should be recorded on June 30 and December 31 of this year = $190,000*8%*6/12 = $7,600

Solution 3:

Amount of cash is owed to investors on June 30 and December 31 of this year = $7,600

Solution 4:

Book value of the bonds on December 31 of this year = $190,000

Book value of the bonds on December 31 of next year = $190,000

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