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Ch09In-ClassEx

# Ch09In-ClassEx - Chapter 9 In-Class Exercise Herbal...

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Chapter 9 In-Class Exercise Herbal Enterprises issued 10-year bonds with a face value of \$10 million on October 1, 2007. The bonds pay interest at 7% annually. The bonds sold at 93.29% of face value to yield an effective rate of 8%. (Adapted from Exercise 9-4.) 1. How was the price of the bond determined? 2. How much interest expense should Herbal recognize on the bonds for the fiscal year ended September 30, 2008? 3. What amount of net liability would the company report for the bonds on its September 30, 2008 balance sheet? 4. How much total expense would the company recognize for the bonds over the 10-years they are outstanding? 5. Assume that after 3 years (7 years left), the investor decides to see the bonds. If the market rate of interest on the date of the sale is 9%, what was the selling price of the bonds?

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Chapter 9 In-Class Exercise Solutions Herbal Enterprises issued 10-year bonds with a face value of \$10 million on October 1, 2007. The bonds pay interest at 7% annually. The bonds sold at 93.29% of face value to yield an effective rate of
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