Bond Problems Solutions

# Bond Problems Solutions - ACC 201 BOND PROBLEMS 1 Bonds...

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ACC 201 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? July 1, 2005 Cash 170,385,490 Premium Bonds Payable 20,385,490 Bonds Payable 150,000,000 December 31, 2005 Interest Expense 6,815,420 Premium Amortization 684,580 Interest Payable 7,500,000 Accrue for 6 months of interest expense. Payment will be made January 1. Face Value 150,000,000              Coupon 5% Rate 4% Periods 20 PV \$170,385,490 Period Date I nterest Payment Amortization Carrying Value \$170,385,490 1 6,815,420        7,500,000         684,580                   \$169,700,909 2 6,788,036        7,500,000         711,964                   \$168,988,945 3 6,759,558        7,500,000         740,442                   \$168,248,503 4 6,729,940        7,500,000         770,060                   \$167,478,443 5 6,699,138        7,500,000         800,862                   \$166,677,581 6 6,667,103        7,500,000         832,897                   \$165,844,684 7 6,633,787        7,500,000         866,213                   \$164,978,472 8 6,599,139        7,500,000         900,861                   \$164,077,611 9 6,563,104        7,500,000         936,896                   \$163,140,715 10 6,525,629        7,500,000         974,371                   \$162,166,344 11 6,486,654        7,500,000         1,013,346                \$161,152,997 12 6,446,120        7,500,000         1,053,880                \$160,099,117 13 6,403,965        7,500,000         1,096,035                \$159,003,082 14 6,360,123        7,500,000         1,139,877                \$157,863,205 15 6,314,528        7,500,000         1,185,472                \$156,677,733 16 6,267,109        7,500,000         1,232,891                \$155,444,843 17 6,217,794        7,500,000         1,282,206                \$154,162,637 18 6,166,505        7,500,000         1,333,495                \$152,829,142 19 6,113,166        7,500,000         1,386,834                \$151,442,308 20 6,057,692        7,500,000         1,442,308                \$150,000,000

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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? September 1, 2005
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Bond Problems Solutions - ACC 201 BOND PROBLEMS 1 Bonds...

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