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zavuch27 [327]
3 years ago
12

On January 1, a company issues bonds dated January 1 with a par value of $250,000. The bonds mature in 5 years. The contract rat

e is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $260,148. The journal entry to record the first interest payment using straight-line amortization is
Business
1 answer:
-BARSIC- [3]3 years ago
6 0

Answer and Explanation:

Given:

Sales price of bond = $260,148

Issue price of bond = $250,000

Total premium on bond = $260,148 - $250,000

Total premium on bond = $10,148

Number of year = 5 year = 5 × 2 semi-annual = 10

Per period payment = Total premium on bond / 10

Per period payment = $10,148 / 10 = $1,014.80

Cash paid = $250,000 × (9%/2) = $11,250  

                               Journal Entry

Date       Account Title and Explanation    Debit     Credit

              Interest                     A\c Dr     10,235.20  

              Premium on Bond   A\c Dr        1,014.80  

              Cash                        A\c Cr                        11,250.00

Note: interest calculated from balancing figure

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1 year ago
The market capitalization treasure on the stock of flex steel company is 12%. the expected ROE is 13% and the expected EPS are 3
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Answer:

a. ROE (r) = 13% = 0.13

EPS = $3.60

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Plowback ratio (b) = 50% = 0.50

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Growth rate = r x b

Growth rate = 0.13 x 0.50 = 0.065

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Po = $1.80/0.12-0.065

Po = $1.80/0.055

Po = $32.73

P/E ratio = <u>Current market price per share</u>

                  Earnings per share

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P/E ratio = 9.09        

b.  ER(S) = Rf + β(Rm - Rf)

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In the second part of the question, Cost of equity (return on stock) is a function of risk-free rate plus beta multiplied by market risk-premium. Market risk premium is market return minus risk-free rate.

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