Assignment 4 key - ACCT 2301 FALL 2008 Li 1. Calculate the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCT 2301 FALL 2008 Li Assignment 4 Solution 1 1. Calculate the selling price for the following bonds. a. Company NOD sold 5-year bonds with a face value of $100,000 at 1/1/2008. The bonds carry a coupon rate of 5% and pay interests every 6 months. The market interest rate at the time of sale was 6%. PV($100,000) + PVA($100,000x5% x 6/12), with r=3%, n=10; Selling price= $100,000x0.7441 + 2,500x8.5302 = 74,410+21,326=$95,736 b. Company NOD sold 8-year bonds with a face value of $1,000,000 at 7/1/2006. The bonds carry a coupon rate of 7% and pay interests every year. The market interest rate at the time of sale was 4%. PV($1,000,000) + PVA($1,000,000x7%), with r=4%, n=8; Selling price= $1,000,000x0.7307 + 70,000x 6.7327 = 730,700+471,289=$1,201,989 2. On January 1, 2006 Anthony, Inc. issued a bond of $10,000 for $10,900 cash. The bond has a life of 5 years and 8% coupon rate. The bond was dated on January 1, 2006. Interests are accrued annually and paid on January 15 th the following year. The market interest rate was 6%. The company provides financial statements on a calendar year basis, and it uses effective-interest method for amortization on bonds. You are to complete the following entries: (round to the nearest dollar.) (a) Was the bond issued at par, at a premium, or at a discount? At a premium (b) Journal entry at January 1, 2006--Date of issuance: Dr. Cash $10,900 Cr. Bonds Payable $10,000 Cr. Premium on Bonds Payable 900 (b) Journal entry at December 31, 2006: Dr. Interest Expense ($10,900 x 6%=65) 654 Dr. Premium on Bonds Payable
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

Assignment 4 key - ACCT 2301 FALL 2008 Li 1. Calculate the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online