4632fromtable5inappendixa 12797

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Unformatted text preview: a company can compel all bondholders to surrender their bonds. Consequently, if a company wishes to retire all outstanding bonds, the company will have to resort, at least partially, to exercising any relevant call provisions. P11–11 Concluded e. Bonds Payable (–L) Extraordinary Loss on Redemption (E, –SE) 5,000.00 380.35 Discount on Bonds 205.35* Cash (–A) 5,175.00 Payable (+L) Redeemed bonds. *see table D a te 1/1/12 6/30/12 1/1/13 6/30/13 1/1/14 6/30/14 Interest Expense Payment Amount $325.40 327.18 329.08 331.12 333.30 Disc./Prem. Amortizatio n $300.00 300.00 300.00 300.00 300.00 $25.40 27.18 29.08 31.12 33.30 Face Value Disc./Prem. Balance $5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 $351.42 326.02 298.84 269.76 238.64 205.35 Book Value $4,648.58 4,673.98 4,701.16 4,730.24 4,761.36 4,794.65 P11–12 a. Face value $ 100,000 Present value (i = 5%, n = 8) PV of face value ($100,000 $ Table 4 in Appendix A) .67684 from 67,684 PV of interest payments ($3,000 Table 5 in Appendix A) Total present value 6.46321 from 19,390 87,074 Discount $ 12,926 Date 12/31/12 6/30/13 12/31/13 6/30/14 12/31/14 6/30/15 12/31/15 6/30/16 Interest Expensea $4,353,70 4,421.39 4,492.45 4,567.08 4,645.43 4,727.70 4,814.09 4,904.79 Cash Paymentb $3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 Amortized Discountc $1,353.70 1,421.39 1,492.45 1,567.08 1,645.43 1,727.70 1,814.09 1,904.79 Book Valued $ 88,427.70 89,849.09 91,341.54 92,908.62 94,554.05 96,281.75 98,095.84 100,000.00 a Interest Expense = Book Value at the Beginning of the Period Effective Rate per Period of 5% b Cash Payment = Face Value of $100,000 Stated Rate per Period of 3% c Unamortized Discount = Unamortized Discount at the Beginning of the Period – Excess of Interest Expense Over the Cash Payment d Book Value = Face Value of $100,000 – Unamortized Discount P11–12 Concluded b. Cash outflows Total interest payments = $3,000 8 payments = $24,000 Total principal payment = $100,000 on maturity of the bonds Total cash outflow = $24,000 + $100,000 = $124,000 Cash inflows Cash inflows = Proceeds received upon issuing the bonds = $87,0...
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