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Bond Problems

# Bond Problems - BOND PROBLEMS 1 Bonds with a face value of...

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BOND PROBLEMS 1. Bonds with a face value of \$150,000,000, coupon rate of 10% and a market rate of 8% that mature in 10 years. The bonds are issued July 1, 2005. What are the journal entries as of 7/1/2005 and December 31, 2005? N=20 I/YR=4% Pmt=150,000,000*10%/2=7,500,000 FV=150,000,000 PV=170,385,490 Date Interest Payment Premium Amo rt Carrying Value 07/01/05 \$170,385,490 12/31/05 6,815,420 7,500,000 684,580 169,700,909 07/01/05 Cash 170,385,490 Premium on Bonds Payable 20,385,490 Bonds Payable 150,000,000 12/31/05 Interest Expense 6,815,420 Premium Amortization 684,580 Cash 7,500,000 2. Bonds with a face value of \$20,000,000 that mature in 20 years. The required rate of return for these bonds is 5%, while the coupon rate is 4%. The bonds are issued September 1, 2005. What are the journal entries as of September 1, 2005, December 31, 2005 and December 31, 2006? N=40 I/YR=2.5% Pmt=20,000,000*4%/2=400,000 FV=20,000,000 PV=\$17,489,722 Date Interest Payment Discount Amo rt Carrying Value 09/01/05 \$17,489,722 02/28/06 437,243 400,000 37,243 17,526,966 08/31/06 438,174 400,000 38,174 17,565,140 02/28/07 439,128 400,000 39,128 17,604,268 09/01/05 Cash 17,489,722 Discount Bonds Payable 2,510,278 Bonds Payable 20,000,000 12/31/05 Interest Expense 291,495 Discount Amortization 24,828 Interest Payable 266,667 12/31/06 Interest Expense 292,752 Discount Amortization 26,085 Interest Payable 266,667 3. Bonds with a face value of \$300,000,000 that mature in 15 years.

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Bond Problems - BOND PROBLEMS 1 Bonds with a face value of...

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