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ra1l [238]
2 years ago
12

On January 1 of this year, Thomas Insurance Corporation issued bonds with a face value of $ 4,000,000 and a coupon rate of 9 per

cent. The bonds mature in five years and pay interest annually every December 31. When the bonds were sold, the annual market rate of interest was 6 percent. Thomas uses the effective-interest amortization method.
Required:
(a) What was the issue price on January 1 of this year?
Business
1 answer:
e-lub [12.9K]2 years ago
6 0

Bonds Payable amount reflected in balance sheet = $2192890

Face Value = $2000000

Coupon Rate = 10%

Maturity Period = 10 years

Number of compounding = 2

Interest = $2000000 * 10% * 6/12 = $100000

Period = 2 * 10 = 20

Maturity Value = Face Value = $2000000

Market Interest Rate semiannually = 0.085 / 2 = 0.0425

Market Value = Present Value of Future Cash Flows

= PV of Interest + PV of maturity value

= (Interest * PVAF (4.25%, 20)) + (Maturity Value * PVIF (4.25%, 20))

= (100000 * 13.29437) + (2000000 * 0.434989)

= $1329437 + $869978

= $2199415

Since market value is greater than face value, we can say that bonds are issued at a premium.

Premium = $2199415 - $2000000 = $199415

Journal Entry to record the issuance of bonds:

Cash a/c                                               Dr          $2199415

     To Bonds Payable a/c                                 $2000000                            

     To Premium on the issue of bonds            $199415

Bonds Payable amount is a liability account that carries the quantity owed to bondholders by way of the company. This account usually seems in the lengthy-term liabilities section of the stability sheet, on account that bonds usually mature in more than one year.

Learn more about Bonds Payable amount here: brainly.com/question/7158291

#SPJ4

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On May 31, 2018, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the ent
asambeis [7]

Answer:

$800,000

Explanation:

The calculation of book value of the assets of the cosmetics component is given below:-

Gain on Sale of the Assets = Income from Operation of a Discontinued Components - Income from Operations

= $620,000 - $300,000

= $320,000

Gain/Loss on Sale of Asset = Sale Value of Assets - Book Value of Assets

= $1,120,000 - $320,000

= $800,000

5 0
3 years ago
This morning your manager asked you to complete a special task by this afternoon. While you are working on it, a customer asks y
dem82 [27]
Ill ask for help from another coworker- if there was no one else available to help them I would help the customer if I am in that field


i needed points
8 0
2 years ago
azra’s position as the manager of natural nutrition gives her the ________ to make many decisions during the course of a week, i
Mama L [17]

The appointment of Azra as manager gives her <u>authority</u> to make many decisions during the course of a week

Let understand that options includes <em>accountability, authority, responsibility, delegation.</em>

<em />

Basically, the main function of an organization manager is increase the efficiency or effectiveness of their employees, processes, projects, organizations etc

However, the four basic functions of manager includes effective planning, organizing, leading, and controlling of units in the company.

Therefore, Azra’s position gives her authority to <em>make decision</em>, <em>assigns tasks</em>, <em>approve budget requests</em> and <em>market the business</em>.

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6 0
2 years ago
Ginny Trueblood is considering an investment which will cost her $120,000. The investment produces no cash flows for the first y
velikii [3]

Answer:

The project should be rejected as the payback period of 3.97 years exceeds the required 3 years. So, the correct option is E

Explanation:

The table showing the discounted cash flows of each year:

Computing discounted payback as:

Discounted Payback = Number of years + (Initial Cost - Discounted Cash flow of year 1 + Discounted Cash flow of year 2 + Discounted Cash flow of year 3 / Discounted Cash flow of year 4)

= 3 + ($120,000 - $0 - $28,925.62  - $41,322.31  / $51,226.01)

= 3 + ($49,752.07 / $51,226.01)

= 3 + 0.97

= 3.97

Working Note:

Discounted Cash Flow is computed as:

Discounted cash flow = Cash Flow / (1 + r) ^ n

where

r is rate of return that is 10%

n is number of year

So,

For 1st year:

= $0 / (1 + 0.1) ^1

= $0

For 2nd year:

= $35,000 / (1 + 0.1) ^ 2

= $35,000 / 1.21

= $28,925.61

For 3rd year:

= $55,000 / (1 + 0.1) ^ 3

= $55,000 / 1.331

= $41,322.31

For 4th year:

= $75,000 / (1 + 0.1) ^ 4

= $75,000 / 1.4641

= $51,226.01

6 0
3 years ago
You need a 30-year, fixed-rate mortgage to buy a new home for $245,000. Your mortgage bank will lend you the money at an APR of
ivanzaharov [21]

Answer:

xcmm this question made me think

Explanation:

LOL

6 0
2 years ago
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