Ask question

Ask question

All categories

3 years ago

15

Park Corporation is planning to issue bonds with a face value of $2,000,000 and a coupon rate of 10 percent. The bonds mature in

10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry to record the issuance of the bonds

1 answer:

Alborosie3 years ago

8 0

Answer:

Cash 2,214,007 debit

bonds payable 2,000,000 credit

premium on B.P 214,007 credit

Explanation:

To know the proceeds for the bonds we will calculate the present value of the coupon payment and the present vlaue of the maturity at market rate:

The coupon payment will be an ordnary annuity

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

Coupon payment: 2,000,000 x 0.05 = 100,000

time: 10 years x 2 payment per year = 20

rate 8.5% annual rate: 0.085/2 = 0.0425 semiannual rate

$100000 \times \frac{1-(1+0.0425)^{-20} }{0.0425} = PV\\$

PV $1,329,436.5808

Whilethe maturity the present value of a lump sum

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 2,000,000.00

time 10 years to maturity

rate 0.085

$\frac{2000000}{(1 + 0.085)^{10} } = PV$

PV 884,570.83

PV coupon payment $1,329,436.5808

PV maturity $884,570.8301

Total $2,214,007.4109

facevalue 2,000,000

premium 214,007

You might be interested in

Terrence needs to deliver negative feedback to an employee, Chad, using his company's appraisal software. Before delivering the

Sunny_sXe [5.5K]

<h2>meet with Chad in person and establish goals for improvement.</h2>

Explanation:

Whenever an employee shows negativity either to his co-employee or to sub-ordinates, it is better to call in person and meet.

We can get the pointers which is making that particular employee to behave in such a manner or we can otherwise guide that employee in the right direction so that the organizational goals are met.

Following things will not work:

Discussing about the poor performance of Chad's with other managers
Sending an e-mail stating the poor performance of Chad's to all the employees.
Warning Chad's coworker is not a good solution, because here Chad's behavior towards co-workers are wrong and not vice versa.

6 0

3 years ago

Suppose you invest $1000 at an interest rate of 6%, compounded annually. Calculate the equivalent interest rate under continuous

Vikki [24]

Answer:

The equivalent interest rate under continuous compounding is 5.8%

Explanation:

Annual compounding

A = P(1+r)^n

P = $1,000

r = 6% = 0.06

n = 1 year

A = 1000(1+0.06)^1 = 1000(1.06) = $1060

Continuous compounding

A = Pe^rt

A = $1060

P = $1000

t = 1 year

1060 = 1000e^r

e^r = 1060/1000 = 1.06

e^r = 1.06

r = ln 1.06 = 0.058 = 5.8%

8 0

3 years ago

When tolls on the Dulles Airport Greenway were reduced from $1.75 to $1.00, traffic increased from 10,000 to 26,000 trips a day.

Artemon [7]

Answer:

Price elasticity of demand, $P_{ED}$ = 1.63

Explanation:

We know,

Price elasticity of demand, $P_{ED}$ = $\frac{Percentage change in Quantity Demanded}{Percentage change in prices}$

We will be using mid-point method to calculate the price elasticity.

Here,

Percentage change in Quantity demanded = $\frac{Q_{1} - Q_{0}}{\frac{Q_{1} + Q_{0}}{2}}$ × 100

or, Percentage change in Quantity demanded = $\frac{26,000 - 10,000}{\frac{26,000 + 10,000}{2}}$ × 100

Therefore, % change in Quantity demanded = $\frac{16,000}{18,000}$ × 100 = 88.89%

Again,

Percentage change in price = $\frac{P_{1} - P_{0}}{\frac{P_{1} + P_{0}}{2}}$ × 100

or, Percentage change in price = $\frac{1.00 - 1.75}{\frac{1.00 + 1.75}{2}}$ × 100

Therefore, Percentage change in price = $\frac{-0.75}{1.375}$ × 100 = - 54.55%

Therefore, Price elasticity of demand, $P_{ED}$ = 88.89% ÷ (- 54.55%) = 1.63

We know, price elasticity is always positive. Therefore, we have to give an absolute value for price elasticity.

5 0

3 years ago

If women only have two children, what will our population do by 2150? grow to 8.7 billion grow to 10.8 billion decrease to 4 bil

Gnesinka [82]

The correct answer is : <span>grow to 10.8 billion</span>

7 0

3 years ago

When a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and

lora16 [44]

Answer:

B. FALSE

Explanation:

When a country becomes an importer of a specific kind of good, the local / domestic producers are worse off because it increases competition in their local market.

If a good is imported there will be a decrease in producer surplus, and an increase in consumer surplus. Domestic producers lose from trade, and domestic consumers gain.

6 0

3 years ago