CA 14-1 P2 - (c) Assuming that a discount rate is needed to...

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

View Full Document Right Arrow Icon
(Bond Theory: Balance Sheet Presentations, Interest Rate, Premium) On  January 1, 2011, Nichols Company issued for $1,085,800 its 20-year, 11% bonds  that have a maturity value of $1,000,000 and pay interest semiannually on  January 1 and July 1. Bond issue costs were not material in amount.Below are  three presentations of the long-term liability section of the balance sheet that  might be used for these bonds at the issue date. (a) Discuss the conceptual merit(s) of each of the date-of-issue balance sheet  presentations shown above for these bonds. (b) Explain why investors would pay $1,085,800 for bonds that have a maturity  value of only $1,000,000.
Background image of page 1

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

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

Unformatted text preview: (c) Assuming that a discount rate is needed to compute the carrying value of the obligations arising from a bond issue at any date during the life of the bonds, discuss the conceptual merit(s) of using for this purpose: (1) The coupon or nominal rate. (2) The effective or yield rate at date of issue.( d) If the obligations arising from these bonds are to be carried at their present value computed by means of the current market rate of interest, how would the bond valuation at dates subsequent to the date of issue is affected by an increase or a decrease in the market rate of interest? (AICPAadapted)...
View Full Document

This note was uploaded on 10/03/2011 for the course ACCOUNTING 103 taught by Professor Ngo during the Spring '11 term at University of California, Berkeley.

Page1 / 2

CA 14-1 P2 - (c) Assuming that a discount rate is needed to...

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