expected life of the band or when appropriate, a shorter period to the net carrying amount 104) The true interest rate used by investors to value a bond is called the: Expert Answer. C. Remains the same . D) $347,464. C) Bonds 2 and 4. ^$500,000 6% 1/2 year = $15,000. A) No gain or loss. 60) The entry to record a monthly payment on an installment note such as a car loan: Issuing more shares also means that ownership is now spread across a larger number of investors. Answer: C $500,000 0.61027* = $ 305,135 D) 8.5 times. D) 25.0 times. C) The stated interest rate and the market interest rate are equal. Market Rate of Return 8 % 10 % 10 % 9 % N = 10 years 2 periods each year = 20 periods. Question: The market rate of interest for a bond issue which sells for more than its face value is a. less than the interest rate stated on the bond. This button displays the currently selected search type. A) $83,920. i = 7%/2 semi-annual periods = 3.5% Although most gyms are closed on holidays, if you are a member of Anytime Fitness, you can do just that. 102) Given the information below, which bond(s) will be issued at a premium? What is the issue price of the bond (rounded to nearest whole dollar)? This wide selection also means that investors should do their homework. 01/01/2021 $ 5,500,000 Explanation: [$100,000/($900,000 + $1,100,000)/2] = 10%, 176) A company reports net income of $250,000. A portion of the bond amortization schedule appears below: The bonds have an interest of 16 percent. A) Face amount. Use (PV of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. A) Decrease for bonds issued at a discount and decrease for bonds issued at a premium. USD rises after hawkish Fed minutes -Weekly Currency Analysis https://lnkd.in/dy22KejG #usdinr #usfed #inflation #rbi Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value (Use Table 2 and Table 4, contained within a separate file.) 12/31/2023 7,000 6,160 840 101,833 $3,220.99 $833.33 = $2,387.66 decrease in carrying value. THA's accountant has projected the following amortization schedule from issuance until maturity: School De La Salle Araneta University; Course Title CBM 4A; Type. If the note had instead been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2021, which of the following would be true? Explanation: Carrying value, $42 million, less cash paid to retire the bonds of $36 million = $6 million gain. 81) Which of the following definitions describes a serial bond? 01/01/2021 $ 194,758 Annual payments of $20,000 begin on December 31, 2021. D) $200,000. D) $6,571. Answer: B Papillion La Vista Community Schools board members are eyeing May 9 for a $129.9 million bond election that would pay for a new elementary school, buy land for . 80) Which of the following definitions describes a term bond? C) Bonds that mature all at once. B) $186,410. C) The bonds were issued at a price greater than their face value. 149) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. The market rate for this type of bond is 5%. A company can obtain debt financing from a bank in the form of a loan, or else issue bonds to investors. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. (e) In August, you order a sweater from Sears using its online catalog. The prior mortgage with the higher interest rate is paid off, and the borrower obtains a new mortgage at the lower rate. The entry to record the bond issuance would have what effect on the financial statements? 92) A $500,000 bond issue sold for $510,000. 78) A bond is a formal debt instrument that obligates the borrower to repay a stated amount at the maturity date. Companies may also issue debt that is not backed by underlying assets. The basic features of a bondcredit quality and durationare the principal determinants of a bond's interest rate. Explanation: FV ($500,000); PMT ($15,000); I (3.5%); N (20 periods) = PV ($464,469). (Use a financial calculator or Excel) 06/30/2021 $ 300,000 $ 345,639 $ 45,639 8,686,606 Interest expense 1,000 Firms or governments may issue bonds for special projects or through special purpose vehicles. $200,000 0.45639* = $ 91,278 Answer: B Bond 1 Bond 2 Bond 3 Bond 4 Such restrictions can hamper a companys ability to do business and limit its operational options. (Use Table 2 and Table 4, contained within a separate file.) Increases. Therefore, the bonds: B) Present value of expected cash inflows from using the underlying asset. Explanation: FV ($100,000); PMT ($3,000); I (3.5%); N (10 periods) = PV ($95,842) (rounded). D) Leasing transfers the title to the lessee at the beginning of the lease. B) Increases expenses, increases liabilities, and increases assets. A portion of the bond amortization schedule appears below: D) Cannot be determined from the given information. D) Supported by specific assets pledged as collateral by the issuer. Explanation: B) Decreases. During periods when interest rates are continually falling, bonds will trade at a premium so that the YTM moves closer to the falling interest rates. $50,000 0.67556* = $ 33,778 d. Less than the market rate. A bond functions as a loan between an investor and a corporation. In a press release, the central bank has provided the date for . The most common type of bonds are issued by firms. The present value of the principal amount due at the end of the life of the . Step 1 - Calculate the Present Value of the Face Value of $100,000. Answer: B D) Cannot be determined from the given information. What is the issue price of the bond (rounded to nearest whole dollar)? C) More than the market rate. $2,416.60 $625.00 = $1,791.60 decrease in carrying value, 64) A company issues a $200,000, 5%, six-year note on January 1, 2021. C) 12.5%. Step 3 - Calculate the Issue Price of the Bond. A) 21.0 times. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. A) A debit of $3 million to a loss account. Answer: A Interest payments are made semi-annually. 12/31/2022 7,000 6,208 792 102,673 Explanation: ($7,000 + $1,000 + $2,000)/1,000 = 10.0 times. B) Bond 2. A) $139,609. THA's accountant has projected the following amortization schedule from issuance until maturity: i = 8%/2 semi annual periods = 4% Sales $ 50,000 A) Face rate. 134) X2 issued callable bonds on January 1, 2021. What is the return on assets for Surfer Co.? For more information, or to apply, please contact: Howard Newman. D) Assuming more debt reduces leverage. What is the company's average total assets for the year? Total liabilities (end of year) 24,000 12/31/2021 250,000 218,800 31,200 5,438,800 The market rate for this type of bond is 7%. A) Secured and term. **Table 4: Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value Record keeping is simple because all bondholders get the same deal. The actual yield rate. The market rate for this type of bond is 7%. 17.Conceptually, the proceeds from the sale of a bond will equal to a. d. no necessary relationship exists between the two rates, the amortization of discount on bonds payable . Explanation: $250,000/$5,000,000 = 5% 2 payments per year = 10%. d) The Wall Street Journal prime rate. 114) When bonds are issued at a premium, what happens to the carrying value and interest expense over the life of the bonds? A) $163,200. When a bond issue sells for less than its face value, the market rate of interest is: Higher than the stated rate of interest. C) April 30, 2024 C) $8,800,000. 77) On July 1, 2021, a company signs a 30-month lease for an office building. Within this time frame, there are short-term bonds (1-3 years), medium-term bonds (4-10 years) and long-term bonds (10 years or more). c. Not dependent on the rate of the bond. Total assets (end of year) 60,000 B) Equal to the interest expense. ft. home is a 3 bed, 2.0 bath property. The company's normal borrowing rate is 12%. The bonds pay interest annually on December 31 each year. A) Bond 1. The entry to record the retirement will include: B) Equal to the interest expense. B) Secured only by the "full faith and credit" of the issuing corporation. D) Increase and decrease stockholders' equity. U.S. Securities and Exchange Commission. C) Sold at a premium because the stated interest rate was higher than the market rate. B) Increase and decrease assets. Less than the rate stated on the face of the bond. A) Matures on a single date. The bonds were issued at: . C) $538,973. 101) Given the information below, which bond(s) will be issued at a discount? Total liabilities (end of year) 24,000 D) $833.33. A) Decrease in assets. i = 7%/2 semi-annual periods = 3.5% The offers that appear in this table are from partnerships from which Investopedia receives compensation. i = 6%/2 semi-annual periods = 3% Such bonds are known as collateralized debt obligations (CDOs). 01/01/2021 $ 5,500,000 C) Is a schedule that reflects the changes in carrying value of the bond over its term to maturity. 58) Babble Co. signs a five-year installment note on January 1, 2021. Average total assets = $425,000 [($400,000 + $450,000)/2]; therefore, net income must be $42,500 ($425,000 10%). Total stockholders' equity (end of year) 36,000 C) The stated interest rate and the market interest rate are equal. The market rate for this type of bond is 12%. 06/30/2021 $ 250,000 $ 220,000 $ 30,000 5,470,000 06/30/2023 7,000 7,925 925 199,039 Bonds have a set term; usually, a bond's term ranges from one to 30 years. The market rate for this type of bond is 5%. Answer: B The current market rate of interest is also 10%. 184) Selected financial data for Channel Co. is provided below: D) The answer cannot be determined from the information provided. ($ in millions) Total assets (beginning of year) 900,000 D) Bonds 1 and 3. C) $214,877. 0. B) Net income/Interest expense. 180) Financial leverage is best measured by which of the following ratios? 115) Bonds payable should be reported as a long-term liability in the balance sheet at the: What is the issue price of the bond? Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value Brooklyn, NY, 11219. A portion of the bond amortization schedule appears below: A bond's price is more likely to rise or fall in the middle of its term based on conditions at that time. C) Remains the same. Interest payments are made semi-annually. Choose "Transfer securities" from the ManageDirect menu. 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73 Canal Street, New York, NY
