Assignment four Fall 2014 Acct201

1. Master Corporation released 14%, 5-year bonds using a par benefit of $5, 000, 500 on January 1, 2010. Interest will be paid semiannually on each 06 30 and December 23. The you possess were granted at $5, 368, 035 cash if the market level for this bond is 12% (a) Prepare the general record entry to record the issuance with the bonds in January 1, 2010. (b) Show how the bonds will be reported on Walker's "balance sheet" at January 1, 2010. (c) Believe instead that Walker uses the straight-line method for amortizing any price cut or premium on you possess. Prepare the typical journal access to record the initially semiannual fascination payment in June 40, 2010. (a) DR CR Jan. you, 2010 Money 5, 368, 035 High quality on Bonds Payable 368, 035 You possess Payable your five, 000, 1000 Issued a genuine at reduced on issue date. (b) Partial "balance sheet" as of Walkers Corporation January. 1, 2010 Long-Term Debts:

Bonds Payable 5, 000, 000 Maturity value Add: Premium upon Bonds Payable 368, 035 $ five, 368, 035 Carrying Value (c)

Making use of the straight-line technique, the premium amortization will be 36, 803. 5 every single six months. 368, 035/10 times = thirty eight, 803. a few Interest: (5, 000, 000*0. 14*0. 5=350, 000) DR CR Summer 30, 2010 Bond Curiosity Expense 313, 196. five Premium upon Bonds Payable 36, 803. 5 Funds 350, 1000 Paid semiannual interest and amortized superior. 2 . An organization issues you possess with a doble value of $800, 000 on their concern date. The bonds adult in a few years pay 6% interest per annum in two semiannual payments. On the issue date, the marketplace rate of interest is definitely 8%. Calculate the price of the bonds prove issue particular date. Market rate of interest (8%) > contact interest rate (6%) 1 . Interest paid out by the relationship (semiannual): (800, 000*0. 06)/2 = 24, 000 Semiannual rate = 4% (Market rate 8%/2)

Semiannual times = 15 (Bond existence 5 years*2)

2 . This current value of the bond: Desk B. you (0. 6756*800, 000) sama dengan 540, 480 3. Present value for interest payments: Stand B. three or more (8. 1109*24, 000) = 194, 661. 6 4. The price of the bonds issues issue date: Present worth of the bonds + Present value in the interest payments = 540, 480 + 194, 661. 6th = 735, 141. six

3. What exactly is bond? Discover and talk about the different types of a genuine. �

Provides are a type of debt. For instance , you financial loan your money to a company, a city, the government – and they assurance to pay you back in total, with standard interest payments. A city may promote bonds to boost money to generate a bridge, while the authorities issues provides to financial its spiraling debts The most popular types of Bonds:

Secured and Unprotected:

Secured a genuine have certain assets of the issuer pledged as security. Unsecured a genuine are supported by the issuer's general credit standing. Term and Serial:

Term bonds are scheduled for maturity on a single specified date. Serial a genuine mature at more than one time. Registered and Bearer:

Listed bonds are issued inside the names and addresses of their holders. Bearer bonds will be payable to whoever keeps the connection. Convertible and Callable:

Descapotable bonds can be exchanged for the fixed volume of common stocks of the issuing corporation. Callable bonds have an option exercisable by the issuer to cease working them by a stated dollar amount just before maturity....

Sources: PowerPoint slip 29, thirty-three, 34



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