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Goshia [24]
1 year ago
9

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:
(c) What amount of cash interest should be paid on December 31 of this year? December 31 of next year?
Business
1 answer:
ra1l [238]1 year ago
7 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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Most organisations have different strategies for implementing Information security, Information security is vital to the success of any business.

8 0
3 years ago
Dividends a. are the rates of return on a company’s capital stock. b. are the difference between the price and present value per
faust18 [17]

Answer:

a. are the rates of return on a company's capital stock.

Explanation:

Dividends are are earnings distributed to company's share holders as a result of the shares held by them in the company.

When a company is formed I.e company quoted on the stock exchange, they are usually financed by shareholder's fund.

A share is the unit of capital of a company allocated to an individual while a shareholder is someone who has share(s) in the company. Shareholders are owners of the company. They are also investors and so they expect returns on their investment at the end of each financial period.

These returns are paid to the share holders as dividened which are the rates of returns on a company's capital stock.

7 0
3 years ago
Property rights are legally established titles to the​ ownership. True or False
kakasveta [241]

Answer:

True

Explanation:

The property rights are the rights that are given the authority to use or sell the property resources which fully depend upon the ownership criteria.

It should be legally owned by any person whether such a person is an individual or its a company or government.  

The example of the property rights would be intangible or tangible i.e building, patents, land, copyrights, and other intellectual properties.

8 0
3 years ago
Consider the portfolio choice theory of money demand. how do you think the demand for money will be affected during a hyperinfla
AleksAgata [21]

Answer:

The demand for money decreases sharply.

Explanation:

The portfolio choice and Keynes's theory of demand for money both proposes that as the returns expected on money falls, its demand also falls. When there is an increase in interest rate, it leads to a decrease in the expectation placed on returns on money thus leading to a decrease in demand for money.

6 0
3 years ago
Read 2 more answers
If the expected sales volume for the current period is 25,000 units, the desired ending inventory is 1,000 units, and the beginn
never [62]

Answer:

25,500 units

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Sales units = Opening stock + Production - Closing stock

<em>So, we input the figure with aid of the above formulae</em>

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Production units = 25,000 units - 500 units + 1,000 units

Production units = 25,500 units.

So, the number of units set forth in the production budget, representing total production for the current period is 25,500 units.

7 0
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