MondoBondage case solution

MondoBondage case solution - Features of the Bonds...

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MONDO-BONDAGE ± Features of the Bonds: Issue date: January 1, 1995 Maturity: December 31, 1999 (5 year bonds – 10 payments) Face value: $1,000,000 oupon rate: 0% (payable semi nnually Coupon rate: 10%, (payable semi-annually on June 30 and December 31) ISSUANCE AT PAR Case 1: Issued to yield a 10% return ash 000 000 a. Entry to record issuance of Bond Cash 1,000,000 Bonds Payable 1,000,000 ISSUING BONDS PAYABLE AT PAR fter posting the bond Bonds Payable After posting, the bond account has the following balance: 1,000,000
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ISSUANCE AT PAR . Entry to record first payment b. Entry to record first payment to Bondholders Interest Expense 50,000 ($1,000,000 * 10% * 6/12) Cash 50,000 Amortization table - Case 1 - Yield = 10% Date Bond Pay. Beg. Bal. Int. Exp. Cash pmt. Bond Pay. End. Bal. /1/1995 000000 1/1/1995 1,000,000 6/30/1995 1,000,000 50,000 50,000 1,000,000 12/31/1995 1,000,000 50,000 50,000 1,000,000 6/30/1996 1,000,000 50,000 50,000 1,000,000 12/31/1996 1,000,000 50,000 50,000 1,000,000 6/30/1997 1,000,000 50,000 50,000 1,000,000 12/31/1997 1,000,000 50,000 50,000 1,000,000 /30/1998 ,000,000 0,000 0,000 ,000,000 6/30/1998 1,000,000 50,000 50,000 1,000,000 12/31/1998 1,000,000 50,000 50,000 1,000,000 6/30/1999 1,000,000 50,000 50,000 1,000,000 12/31/1999 1,000,000 50,000 50,000 1,000,000 SUM 500,000 500,000 ISSUANCE AT PAR . Balance at the end of the 4 th ear c. Balance at the end of the 4 year Bonds Payable 1,000,000 ISSUANCE AT PAR . Cash payment on 6/30/99 d. Cash payment on 6/30/99 Interest Expense 50,000 Cash 50,000
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ISSUANCE AT PAR Normal retirement on 12/31/99 e. Interest Expense 50,000 ($1,000,000 * 10% * 6/12) Cash 50,000 Bonds Payable 1,000,000 Cash 1,000,000 , ISSUANCE AT A DISCOUNT Case 2: Issued to yield a 14% return
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MondoBondage case solution - Features of the Bonds...

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