12/31/2024 7,000 6,110 890 100,943 A) $5,500,000. The bonds were issued at: Answer: A $2,500^ 7.36009** = $ 18,400 (rounded) 126) Discount-Mart issues $10 million in bonds on January 1, 2021. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value Explanation: FV ($100,000); PMT ($3,000); I (3.5%); N (10 periods) = PV ($95,842) (rounded). 166) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. NDTV's total expenses in the December quarter rose 4.93 per cent to Rs 88.27 crore. A) $42,500. The US Treasury Bond is a great example of this type of bond issuer. C) 4.0 times. Answer: D A) Face value. Explanation: $250,000/$5,000,000 = 5% 2 payments per year = 10%. 103) The rate quoted in the bond contract used to calculate the cash payments for interest is called the: Answer: B 12/31/2023 7,000 6,160 840 101,833 D) $100,000. The price of bonds has an inverse relationship with interest rates. Perpetual bonds have no maturity date and pay interest forever. 49) Which of the following is not a primary source of corporate debt financing? D) A credit to cash for $42 million. 12/31/2021 250,000 218,800 31,200 5,438,800 B) $125 The interest rate that companies pay bond investors is usually less than the interest rate available from banks. )), Unit Operations of Chemical Engineering (Warren L. McCabe; Julian C. Smith; Peter Harriott), Auditing and Assurance Concepts and Applications (Darell Joe O. Asuncion, Mark Alyson B. Ngina, Raymund Francis A. Escala), The Law on Obligations and Contracts (Hector S. De Leon; Hector M. Jr De Leon), The Tragedy of American Diplomacy (William Appleman Williams), Principios de Anatomia E Fisiologia (12a. 109) Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. 0. Interest expense 1,000 C) Issuing bonds. A declining EPS number is generally viewed as an unfavorable development. n = 5 years 2 periods each year = 10 periods. n = 5 years 2 periods each year = 10 periods A) Secured and term. A) At par. 12/31/2021 250,000 218,800 31,200 5,438,800 Total stockholders' equity (end of year) 220,000 B) Secured and serial. Answer: B N = 5 years 2 periods each year = 10 periods. A) Provide potential benefits only to the issuer. The company's normal borrowing rate is 12%. D) This feature benefits the issuer more when the bond's stated rate is 8% and the market interest rate is 5%. 152) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. B) A discount. A ten-year bond pays 11 percent interest on a 1000 face value annually If it currently sells for 1195 what is its approximate yield to maturity? 68) Which of the following represents an advantage of leasing rather than buying an asset with an installment note? A) $537,194. B) 3.5%. D) 8%. 95) For a bond issue that sells for less than the bond face amount, the stated interest rate is: i = 7%/2 semi-annual periods = 3.5% 117) The carrying value, using the effective interest method, would decrease each year: Fixed income refers to assets and securities that bear fixed cash flows for investors, such as fixed rate interest or dividends. B) Assuming more debt is always good for the company. At which of the following dates would the carrying value be the lowest? Explanation: $600,000/$400,000 = 1.5, 178) A company's balance sheet reports stockholders' equity of $800,000. Explanation: $3,500,000 = $250,000 14 payments. A) The actual yield rate. The following independent situations require professional judgment for determining when to recognize revenue from the transactions. THA's accountant has projected the following amortization schedule from issuance until maturity: Are Treasury Bonds a Good Investment for Retirement? 141) Bronco High School issues $10 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. Slovenia sold 200 million euros ($213.7 million) in the syndicated tap of the 0.4875% October 2050-dated bond on Tuesday, bringing the outstanding volume to EUR1.85 billion, one of the lead . Explanation: ($300,000/$10,000,000) 2 payments per year = 6%. Explanation: ($7,000/$200,000) 2 payments per year = 7%. A) Matures on a single date. One of the more interesting options companies have is whether to offer bonds backed by assets. On June 30, 2018, Mabry Corporation issued $5 million of its 8% bonds for $4.6 million. C) Remains the same. B) 4%. i = 7%/2 semi-annual periods = 3.5% Bonds have several advantages over bank loans and can be structured in many ways with different maturities. $ 54,055 The amount a bond sells for above face value is a premium. 01/01/2021 $ 5,500,000 *Table 2: B) Yield rate. (Hint: Be sure to provide the annual rate rather than the six-month rate.) 132) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. ($ in millions) The bonds pay interest annually on December 31 each year. The bonds pay interest annually on December 31 each year. Answer: B 174) The balance sheet of Sub America reports total assets of $400,000 and $450,000 at the beginning and end of the year, respectively. a. interest expense as a percentage of the bond carrying amount varies from period to period C) Sold at a discount because the stated interest rate was higher than the market rate. 2. 161) In calculating the issue price of a bond, the portion associated with the periodic interest payments is calculated using which time value factor? D) 8%. B) Cash payment rate. 100) Given the information below, which bond(s) will be issued at a premium? C) Bond 3. B) This feature helps protect the issuer against future decreases in interest rates. d. income bonds, Bond issue costs should be 164) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value B) Lease payments often are lower than installment payments. PMT = $500,000 6% 1/2 year = $15,000. D) Cannot be determined from the given information. Tax expense 21,000 B) $625.00 Explanation: FV ($100,000); PMT ($3,000); I (2.5%); N (10 periods) = PV ($104,376) (rounded). D) Bonds 2 and 4. The market rate for this type of bond is 8%. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value A) Bonds backed by collateral. Answer: B C) $104,212. For a bond issue that sells for more than the bond face amount, the effective interest rate is: Multiple Choice Less than the rate stated on the face of the bond. A) 2 years. *Table 2: *Table 2: More than the rate stated on the face of the bond, Less than the rate . **Table 4: How do I implement a good quality cricket and football turf at a low expense? Total assets (end of year) 60,000 D) The carrying value of bonds will never increase. The X2 bonds have a life of: Explanation: $440,000/$8,800,000 = 5% 2 payments per year = 10%. Governments of all sizes sell bonds to fund daily operations and long-term projects from roads to schools. Bond prices and interest rates. A) $100,000. The company wants to establish a sinking fund for retiring the bond issue and will make a semi annual deposit . Like most fixed-income securities, bonds are highly correlated to interest rates.Thus, when interest rates go up, a bond's market . 12/31/2021 400,000 442,000 42,000 8,882,000 B) 3.5%. D) 8%. C) The first year's interest expense would have been higher. D) 8.5 times. 96) Bond X and Bond Y are both issued by the same company. The second most common type of bonds are issued by governments. What is the issue price of the bond (rounded to nearest whole dollar)? ft. home is a 3 bed, 2.0 bath property. Individual investors can buy them through Investment platforms, brokers, and financial services companies such as . The money market deals in short-term loans, generally for a period of a year or less. 153) X2 issued callable bonds on January 1, 2021. 61) How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds? 06/30/2022 7,000 7,855 855 197,225 114) When bonds are issued at a premium, what happens to the carrying value and interest expense over the life of the bonds? 189) Selected financial data for Surfer Co. is provided below: D) Provide no potential benefits. A) Leasing may allow you to borrow with little or no down payment. I = 7%/2 semiannual periods = 3.5%. a. registered bonds What is the issue price of the bond (rounded to nearest whole dollar)? i = 6%/2 semi-annual periods = 3% D) Increase assets and liabilities. i = 5%/2 semi-annual periods = 2.5% B) Increases expenses, increases liabilities, and increases assets. A) $139,609. Why did the population expert feel like he was going crazy punchline answer key? Total liabilities (end of year) 24,000 b. equal to rate stated on the bond 12/31/2021 7,000 7,822 822 196,370 The ability to borrow large sums at low interest rates gives corporations the ability to invest in growth and other projects. Answer: B Why are top-level managers important to large corporations? The market rate of interest for a bond issue that sells for more than its face value is * a. If interest rates decrease, the company can redeem the outstanding bonds and reissue the debt at a lower rate. A) Face amount times the stated interest rate. B) If the bonds were sold at a premium. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. 181) Which of the following is true regarding a company assuming more debt? The market rate for this type of bond is 5%. A bond issued for more than its face value is said to have been issued at a premium, which is the excess of the bond's issue . 01/01/2021 $ 194,758 The longer the tenure the higher the interest rate is.For example, at the end of November 2022, the yield on 2-year T-bonds was 7.49 per cent while the rates were 7.81 per cent for 5-year bonds, 8.25 per cent for 10-year bonds, 8.67 per cent for 15-year bonds and 8.72 per cent for 20-year bonds.A large number of T-bonds yield more than what . Explanation: FV ($500,000); PMT ($15,000); I (3.5%); N (20 periods) = PV ($464,469). **Table 4: 88) Convertible bonds: What effect would the bond issuance have on Megginson, Inc.'s accounting equation? Total stockholders' equity (end of year) 36,000 This was the second year in a row that the company earned this honor. A) Bonds involve less surrendering of ownership control. 84) Serial bonds are: C) $4,000 gain. A bond functions as a loan between an investor and a corporation. As short-term securities became a commodity, the money market became a component of the financial market for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. At which of the following dates would the carrying value be the highest? These bonds are tied to a specific project, such as an infrastructure build. D) Carrying value times the stated interest rate. Sales $ 50,000 c. deferred and amortized over the life of the bonds Explanation: 06/30/2022 300,000 349,363 49,363 8,783,433 B) Leverage enables a company to earn a higher return using debt than without debt. What is the amount of the company's total liabilities? Answer: B D) Bonds 1 and 3. Explanation: [$100,000/($900,000 + $1,100,000)/2] = 10%, 176) A company reports net income of $250,000. d. independent of rate stated on the bond, If bonds are issued at a premium this indicates that Answer: C A) Matures on a single date. Rating analysis and documentation preparation. 172) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. A) A debit of $5 million to a loss account. 12/31/2021 400,000 442,000 42,000 8,882,000 n = 10 years 2 periods each year = 20 periods A) GAAP has been violated. The bond price is called the PPE and there is an abbreviation for the semiannual coupon. C) $1,000,000 d) The Wall Street Journal prime rate. c. More than the market rate. What's the difference between face value and issue price? Total stockholders' equity (end of year) 220,000 183) The times interest earned ratio is calculated as 50) Which of the following is the primary source of corporate equity financing? 1. NDTV Q3 profit down 49.7% to Rs 15 cr, revenue down 9.4% to Rs 105.4 cr. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. 170) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. 01/01/2021 $ 104,212 Tax expense 21,000 The market rate for this type of bond is 5%. Sales $ 50,000 155) The Viper retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. Answer: B Suppose you purchase a $360 annual membership to Anytime Fitness on November 1. A) Less than the interest expense. B) Its stated rate was higher than the prevailing market rate of interest on similar bonds. Step 6 - Complete the Bond Accounting table. 59) Babble Co. signs a five-year installment note on January 1, 2021. is face value. The bonds were issued at face value plus accrued interest. C) Increase in revenues. $3,000^ 8.75206** = $ 26,256 (rounded) B) A discount. 142) Bronco High School issues $10 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. Explanation: $125,000 6% 1/12 = $625, 63) Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. Below is a partial bond amortization schedule for the bonds: d. bond coupon. 92) A $500,000 bond issue sold for $510,000. D) The answer cannot be determined from the information provided. 06/30/2021 $ 7,000 $ 7,790 $ 790 195,548 C) A discount. (Use Table 2 and Table 4, contained within a separate file.) B) Secured only by the "full faith and credit" of the issuing corporation. D) Interest expense/(Net income + interest expense + tax expense). D) Present value of an ordinary annuity of $1. 12/31/2022 7,000 6,208 792 102,673 A) 0.37. D) Bond issue costs are usually lower than fees charged by the bank. A) Decrease for bonds issued at a discount and decrease for bonds issued at a premium. $200,000 $2,387.66 = $197,612.34 new carrying value. B) Decreases. A) 0.67. D) Supported by specific assets pledged as collateral by the issuer. Total assets (end of year) 60,000 139) Bronco High School issues $10 million in bonds on January 1, 2021, that pay interest semi-annually on June 30 and December 31. **Table 4: D) Stated rate. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value Sales $ 50,000 A Look at National Debt and Government Bonds. C) Bonds with greater risk. So, if you buy a Series EE bond today for $25, and hold it for 20 years, you can cash it in for $50. C) Market rate. D) Present value of an ordinary annuity of $1. Key Features of Bonds. C. Equal to the effective interest. C) 6%. A) $10,000,000. A portion of the bond amortization schedule appears below: Explanation: (Hint: Be sure to provide the annual rate rather than the six-month rate.) C) Assuming more debt can be good for the company as long as they earn a return in excess of the rate charged on the borrowed funds. For a bond issue that sells for more than the bond face amount, the effective interest rate is: Multiple Choice The rate printed on the face of the bond. 12/31/2024 7,000 6,110 890 100,943 Interest expense 1,000 Sales $ 940,000 A) $1,250,000 What is the market rate of interest for a bond issue which sells for more than face amount? 90) A bond issue with a face amount of $500,000 bears interest at the rate of 7%. D) Carrying value increases and interest expense decreases. B) 3.5%. We also reference original research from other reputable publishers where appropriate. Interest payments are made semi-annually. The Wall Street Journal prime rate. D) Is equal to the change in book value. Coupon payments from firm bonds may be paid through regular operations, or other indirect sources, such as lines of credit, revolving debt, or even more bonds. 62) Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. Siemens (SIE), Germany's third-largest publicly traded company by market cap, issued its first digital bond as it looks to reduce paperwork and reach out to potential . 12/31/2025 7,000 6,057 943 100,000 C) More than the market rate. A) Future value of $1. C) Carrying value. 128) Discount-Mart issues $10 million in bonds on January 1, 2021. b. term bonds For a bond issue that sells for more than the bond face amount, the stated interest rate is: a. Why Companies Issue Bonds. N = 10 years 2 periods each year = 20 periods. D) $85,000. 12/31/2023 7,000 6,160 840 101,833 B) $95,842. Interest expense increases each six month period These bonds give investors the right to claim a companys underlying assets if the company defaults. Bankruptcy can cost investors some or all of the amount invested. D) Increase and decrease stockholders' equity. When a bond sells at a premium: A. Sep 2007 - Present15 years 6 months. 96) Bond X and Bond Y are both issued by the same company. The bonds pay interest annually on December 31 each year. Answer: A T: +233 302 244694. B) Total assets of $525,000.00, and total liabilities of $327,666.30. The price of a bond issue often differs from its face value. A bond functions as a loan between an investor and a corporation. C) 7%. Stated Rate of Return 5 % 7 % 12 % 10 % A) Decrease in assets. What amount will be recorded for interest expense for the first month's payment on January 31, 2021? i = 6%/2 semi-annual periods = 3% Equal to the interest rate stated on the bond. B) At a premium. Answer: C C) Leasing offers flexibility and lower costs when disposing of an asset. B) $10,000,000. Companies may also issue debt that is not backed by underlying assets. From Libs of TikTok creator to author: Chaya Raichik releases new children's book No More Secrets. D) $200,000. Multiple Choice The rate printed on the face of the bond. 29 Mango Tree Avenue, Asylum Down, Accra, Ghana. Therefore, the bonds: A free, comprehensive best practices guide to advance your financial modeling skills, Financial Modeling & Valuation Analyst (FMVA), Commercial Banking & Credit Analyst (CBCA), Capital Markets & Securities Analyst (CMSA), Certified Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management (FPWM). For a bond issue which sells for less than its face. 06/30/2021 $ 400,000 $ 440,000 $ 40,000 8,840,000 What is the debt to equity ratio for Channel Co.? (eee+xe+ex)dx\int\left(e^{e^{e}}+x^{e}+e^{x}\right) d x(eee+xe+ex)dx. B) $186,410. When a bond issue sells for less than its face value, the market rate of interest is: Higher than the stated rate of interest. X2's accountant has projected the following amortization schedule from issuance until maturity: market value of share is the value at which share is currently A) A credit of $6 million to a gain account. a. the yield rate of interest exceeds the nominal rate Time To Payment. D) The stated interest rate and the market interest rate are unrelated. Bond 1 Bond 2 Bond 3 Bond 4 12/31/2021 400,000 442,000 42,000 8,882,000 The bond terms often define the amount that must be paid to call the bond. Market Rate of Return 8 % 10 % 10 % 9 % A) $8,834,770. This site is using cookies under cookie policy . $15,000^ 14.21240** = $ 213,186 B) Bond X will sell for more than Bond Y. These two types of revenue are accounted for differently. 151) Which of the following statements is correct? D) $100,000. a. less than rate stated on the bond b. equal to rate stated on the bond c. higher than rate stated on the bond d. independent of rate stated on the bond a. decreases the face amount of bonds payable B) Its stated rate was higher than the prevailing market rate of interest on similar bonds. I = 5%/2 semiannual periods = 2.5%. 12/31/2021 300,000 347,464 47,464 8,734,070 78) A bond is a formal debt instrument that obligates the borrower to repay a stated amount at the maturity date. $ 538,972 Interest payments are made semi-annually. The THA bonds have a life of: Suzanne is a content marketer, writer, and fact-checker. (e) In August, you order a sweater from Sears using its online catalog. Answer: D The current market rate of interest is 6%. Determine the indefinite integrals. The bonds have an interest of 16 percent. You would 168) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Answer: A The Bond Market (aka Debt Market): Everything You Need to Know, Commercial Paper: Definition, Advantages, and Example, Guide to Fixed Income: Types and How to Invest, Government Bond: What It Is, Types, Pros and Cons, earnings must be shared among a larger pool, Investor Bulletin Interest Rate Risk When Interest Rates Go Up, Prices of Fixed-rate Bonds Fall. 102) Given the information below, which bond(s) will be issued at a premium? Finally, there are also callable bonds. 2. A) 21.0 times. For example, banks often make companies agree not to issue more debt or make corporate acquisitions until their loans are repaid in full. 'S balance sheet reports stockholders ' equity ( end of year ) 36,000 this the! This type of bonds are tied to a loss account a content marketer,,! In book value term and pay interest annually on December 31 each year = 10 periods: Suzanne is great. 36,000 this was the second year in a row that the company this was the second most type! 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