Question

Swirlie Company issued $2,000,000, 20 year, bonds on April 1st of 2017. The bonds are dated...

Swirlie Company issued $2,000,000, 20 year, bonds on April 1st of 2017. The bonds are dated January 1, 2017. The bonds pay 8% interest. The market rate on April 1st is 8% Required: How much will Swirlie receive when the bonds are issued?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculation of price of bond:
Face value = $2,000,000
Interest rate 8%
Interest amount = $2,000,000 * 8% = $160,000

Present value of Interest during the life of bond:
PV = 160000 * PVAF 8% 20 years
PV = 160000 * 9.81814 = $1,570,902.4

Present value of principal amount:
PV = $2,000,000 * PVF 8% 20 year
PV = 200000 * 021455 = $429,100

Total = 1570902.4 + 429100 = $2,000,000.24
Here it is clear that when the interest rate and the market rate is same then the face value of bonds is the issue price of the bond.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
(a) On 1st April 2017, a company issued OMR 100,000, 10 years, 5% bonds at face...
(a) On 1st April 2017, a company issued OMR 100,000, 10 years, 5% bonds at face value. Interest is payable on 1st January and 1st July every year. 31st December is the year end date for the company. Pass journal entries for the issue of bond and interest for the year ending on 31st December, 2017.
Garrison Company issued $2,000,000, 7%, 20-year bonds on January 1, 2017, at 105. Interest is payable...
Garrison Company issued $2,000,000, 7%, 20-year bonds on January 1, 2017, at 105. Interest is payable annually on January 1. Garrison uses straight-line amortization for bond premium or discount. (a) The issuance of the bonds. (b) The accrual of interest and the premium amortization on December 31, 2017. (c) The payment of interest on January 1, 2018. (d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.
On January 1, 2017, Powell Corporation issued $600,000, 5%, 5-year bonds dated January 1, 2017, at...
On January 1, 2017, Powell Corporation issued $600,000, 5%, 5-year bonds dated January 1, 2017, at 95. The bonds pay annual interest on January 1. The company uses the effective interest method of amortization and has a calendar year end. The market interest rate is 6%. Prepare all the journal entries that Powell Corporation would make related to this bond issue through January 1, 2018. Be sure to indicate the date on which the entries would be made. January 1,...
On January 1, 2016 Able Company issued (sold) $500,000 8% bonds 20 year bonds for $460,000...
On January 1, 2016 Able Company issued (sold) $500,000 8% bonds 20 year bonds for $460,000 when the market rate of interest was 10%. These semi-annual bonds pay interest on July 1 and January 1 of each year.   On January 2, 2017 Able Company retired the bonds by paying $471,000.   REQUIRED; A) MAKE THE JOURNAL ENTRY ABLE MAKES WHEN IT SELLS THE BONDS ON JANUARY 1, 2016 B) MAKE THE JOURNAL ENTRY ABLE MAKES ON JULY 1 2016 WITH THE...
sheridan Company issued 8%, 8-year, $2,461,300 par value bonds that pay interest semiannually on October 1...
sheridan Company issued 8%, 8-year, $2,461,300 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2017, and are issued on that date. The discount rate of interest for such bonds on April 1, 2017, is 12%. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What cash proceeds did Sheridan receive from issuance of the bonds? (Round answer...
1. On January 1, 2017, Flounder Company issued $192,000 of 7%, 10-year bonds at par. Interest...
1. On January 1, 2017, Flounder Company issued $192,000 of 7%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2017, Culver Company issued $144,000 of 10%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semiannually on July 1 and January 1. For each of these two independent situations, prepare journal entries to record the following. (If no entry is required, select...
Ivanhoe Company sold $7,350,000, 8%, 15-year bonds on January 1, 2017. The bonds were dated January...
Ivanhoe Company sold $7,350,000, 8%, 15-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on December 31. The bonds were sold at 97. (a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1
2. Ryan Corporation sold and issued $30,000, 4-year, 8% annual coupon interest rate bonds dated January...
2. Ryan Corporation sold and issued $30,000, 4-year, 8% annual coupon interest rate bonds dated January 1, 19X1, on April 1, 19X1. The bonds pay interest semiannually on June 30 and December 31. The effective market annual rate was 10%. Ryan's year-end is December 31. Calculate the cash issue price on April 1, and record the journal entries for the first 2 interest periods.
On January 1, the Mayes Company issued $400,000 of 6%, 6-year bonds when the market rate...
On January 1, the Mayes Company issued $400,000 of 6%, 6-year bonds when the market rate of interest was 8%. The bonds pay interest semiannually on June 30 and December 31. How much are the proceeds that Ryan will receive from the bond issue date? Select one: A. $360,032 B. $280,400 C. $362,460 D. $399,800
Sama Company issued S.R800,000 in bonds dated April 1, 2020, due in Four years with ten...
Sama Company issued S.R800,000 in bonds dated April 1, 2020, due in Four years with ten percent interest payable annually on April 1. At the time of issue, the market rate for such bonds is 12 percent. - Journalize the transactions from April 1, 2020 to April 1, 2021 (show the calculation)?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT