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bond exercise solution

bond exercise solution - Acct 410 Additional Exercise Bonds...

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Acct 410 Additional Exercise, Bonds Q1) On January 1, 2001, McVay issued $100,000 of 14%, 20-year bonds at $88,075. On the date of issue, the market rate on similar bonds was 16%. The bonds pay interest on January 1 and July 1 (Note: If the company pays interest semi-annually, use half of the annual stated rate for semi-annual interest rate). The carrying value of the bonds (i.e., the net book value of the bond) on January 1, 2021 , will be: a. $88,075 b. $92,476 c. $99,504 d. $100,000 Q2) In the previous question for McVay, how much will the interest expense and coupon payment be on July 1, 2001? Q3) McKenzie Company issued $500,000 of 12%, 10-year bonds at $562,360 on January 1, 2001. Similar bonds were recently issued for 10% (i.e., the market rate is 10%). The bonds pay interest on January 1 and July 1 (Again: If the company pays interest semi- annually, use half of the annual stated rate for semi-annual interest rate). Required: a. Record the issuance of the bonds on January 1, 2001. b. Record the interest payment on July 1, 2001.
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