Question

Corp1 issued $250,000 of 3-year bonds with 5% interest payable semiannually at a time when the...

  1. Corp1 issued $250,000 of 3-year bonds with 5% interest payable semiannually at a time when the

    market rate of interest was 6%. How much did the company receive in issuance proceeds?

Homework Answers

Answer #1

Computation of cash proceeds from issuance of Bonds:

Cash proceeds = Coupon Amount x Present Value Annuity factor (r,n) + Face value x Present Value interest factor (r,n)

Coupon Amount = $250000 x 5% x 1/2 = $6250

Semiannual market interest rate = 6% / 2 = 3%

n = 3 years x 2 = 6 semiannual period

Cash proceeds = $6250 x Present Value Annuity factor (3% , 6) + $250000 x Present Value interest factor (3% ,6)

= $6250 x 5.41719 + $250000 x 0.83748

= $33857.44 + $209370

= $243227.44

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Corp2 issued $500,000 of 4-year bonds with 6% interest payable semiannually at a time when the...
Corp2 issued $500,000 of 4-year bonds with 6% interest payable semiannually at a time when the market rate of interest was 8%. What is the total amount of interest expense the company will have reported for these bonds over their 4-year life? Note—Answer this question without creating an amortization schedule.
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...
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
ALT-BOND-BASICS Johnson Company issued $3,000,000 of bonds with an interest rate of 8% and 6 year...
ALT-BOND-BASICS Johnson Company issued $3,000,000 of bonds with an interest rate of 8% and 6 year maturity. The bonds were issued at a price of 102%. 1 How much cash did Johnson Company receive at issuance? 3060000 2 How much will Johnson need to pay off the bonds at maturity? 3 How much interest will Johnson pay per year? 4 Were the bonds issued at face value, at a discount, or at a premium?
On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on...
On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The corporation uses the effective interest method of amortizing bond premium or discount. Using a financial calculator or excel, estimate the issue price of the bonds under the following three assumptions: (1) Market Rate is 9% (2) Market Rate is 8%   
Relaxation inc is authorized to issue 7%, 10-year bonds payable. On january 1, 2018, when the...
Relaxation inc is authorized to issue 7%, 10-year bonds payable. On january 1, 2018, when the market interest rate is 12%, the company issues $300,000 of the bonds. The bonds pay interest semiannually. Requirements 1.How much cash did the companny recieve upon issuance of the bonds payable ? 2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments 3. Journalize the issuance of the bonds on january 1, 2018 and the first...
calculate bond interest. ABC Corporation issued $75,000, 6%, 5year bonds. interest is payable semiannually.   the market...
calculate bond interest. ABC Corporation issued $75,000, 6%, 5year bonds. interest is payable semiannually.   the market rate of interest is 8%.
On January 2017, BobCat Inc. issued $300,000 seven year bonds with 8% stated interest paid semiannually....
On January 2017, BobCat Inc. issued $300,000 seven year bonds with 8% stated interest paid semiannually. Effective interest rate was 7%. How much cash did BobCat Inc. received a result of the bond issuance and what was the journal entry?
Cali Hardware issued $400,000 of 8%, 20-year bonds. The bonds pay interest semiannually. The market interest...
Cali Hardware issued $400,000 of 8%, 20-year bonds. The bonds pay interest semiannually. The market interest rate at the time of issuance was 10%. Make the journal entry to record the transaction of the issuance of the bonds. Please show all your calculations (i.e., showing me clearly how you calculated the total and related pieces of the total, including the factor from the table). Also, please show your answers carried out to 2 decimal places.
Maggie Enterprises issued $140,000 of 6%, 5-year bonds with interest payable semiannually. Determine the issue price...
Maggie Enterprises issued $140,000 of 6%, 5-year bonds with interest payable semiannually. Determine the issue price if the bonds are priced to yield (a) 6%, (b) 8%, and (c) 4%. Use financial calculator or Excel to calculate answers. Round answers to the nearest whole number. a.) b.) c.)