On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The bond carries an 8% annual interest rate and pays interests annually. The market interest rate at the time the bonds were issued was 6%. (Round to the nearest dollar) Present Value of $1 Table 6% 7% n 5% 8% 1 0.9524 0.9434 0.9346 0.9259 2 009070 0.8900 0.8734 0.8573 3 0.8638 0.8396 0.8163 0.7938 4 0.8227 0.7921 0.7629 0.7350 5 0.7835 0.7473 0.7130 0.6806 Required: 1) What is the amount of interest payment that the company will pay to the bondholders each year? (2 pts) Present Value of $1 Annuity n 5% 6% 7% 8% 1 0.9524 0.9434 0.9346 0.9259 2 1.8594 1.8334 1.8080 1.7833 3 2.7232 2.6730 2.6243 2.5771 4 3.5460 3.6451 3.3872 3.3121 5 4.3295 4.2124 4.1002 3.9927 2) Calculate the proceeds from the bond issue (i.e., selling price of the bond). (5 pts) 3) Prepare the journal entry for the issuance of the bond on January 1, 2009. (4 pts) 4) What is the amount of interest expense that the company should record on its book for the first year (i.e., year of 2009) and the book value of the bond at December 31, 2009? Prepare the journal entry for the company's first interest payment made on December 31, 2009 under the effective-interest rate method. (9 pts) (a) Interest Expense for 2009 = (b) Book Value of the bond at the end of 2009 = (c) Journal Entry for the first interest payment On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The bond carries an 8% annual interest rate and pays interests annually. The market interest rate at the time the bonds were issued was 6%. (Round to the nearest dollar) Present Value of $1 Table 6% 7% n 5% 8% 1 0.9524 0.9434 0.9346 0.9259 2 009070 0.8900 0.8734 0.8573 3 0.8638 0.8396 0.8163 0.7938 4 0.8227 0.7921 0.7629 0.7350 5 0.7835 0.7473 0.7130 0.6806 Required: 1) What is the amount of interest payment that the company will pay to the bondholders each year? (2 pts) Present Value of $1 Annuity n 5% 6% 7% 8% 1 0.9524 0.9434 0.9346 0.9259 2 1.8594 1.8334 1.8080 1.7833 3 2.7232 2.6730 2.6243 2.5771 4 3.5460 3.6451 3.3872 3.3121 5 4.3295 4.2124 4.1002 3.9927 2) Calculate the proceeds from the bond issue (i.e., selling price of the bond). (5 pts) 3) Prepare the journal entry for the issuance of the bond on January 1, 2009. (4 pts) 4) What is the amount of interest expense that the company should record on its book for the first year (i.e., year of 2009) and the book value of the bond at December 31, 2009? Prepare the journal entry for the company's first interest payment made on December 31, 2009 under the effective-interest rate method. (9 pts) (a) Interest Expense for 2009 = (b) Book Value of the bond at the end of 2009 = (c) Journal Entry for the first interest payment
Expert Answer:
Answer rating: 100% (QA)
Answer Calculation of issue price of the bonds Annual interest on bonds 1000000x8 80000 PVIF6 5 4212... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
YThe FlyCan airline serves both regional and cross-country flights within Canada. FlyCan has been authorized by the board of directors to purchase new airplanes to fly long-range, medium- range, and...
-
Airline A depreciates its airplanes over a 15-year period and estimates a salvage value of 10% of the cost of the plane. At the same time, Airline B depreciates identical airplanes over a 25-year...
-
Company has decided to develop cost formulas for its major over- head activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost...
-
A set of 2M biorthogonal signals is obtained from a set of M orthogonal signals by augmenting it with the negative of each signal in the set. (a) The extension of orthogonal to biorthogonal signals...
-
The article The Ames Salmonell/ Microsome Mutagenicity Assay: Issues of Inference and Validation [ Journal of American Statistical Association (1989) 84: 651 661] discusses the importance of...
-
The temperature of Earth's oceans at a depth of \(2500 \mathrm{~m}\) is about \(4{ }^{\circ} \mathrm{C}\). Suppose you want to use this water as the low-temperature thermal reservoir for an electric...
-
Identify at least five sources for locating the whereabouts of a witness.
-
BookWeb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attention of management because the company has experienced soaring inventory handling...
-
1) Calculate the project's NPV, PI, EAV, IRR and PB. (10%) ABC Corporation, a firm with a 8% required rate of return, is considering a new project. Given the following information, evaluate the...
-
Financial statement data of ABC Fencing, Inc. include the following items: Cash .................... $ 21,000 Short-Term Investments .......... 25,000 Accounts Receivable, Net .......... 102,000...
-
Evaluate So Sof Jo y ax y4-ax2 dy dx.
-
Describe five characteristics of any problem facing a work group.
-
Explain how online communication influences the three types of group conflict.
-
The following quote is attributed to Chinese philosopher Lao Tse: The wicked leader is he whom the people despise. The good leader is he whom the people revere. The great leader is he about whom the...
-
Discuss how members can maximize their chances to influence the group.
-
Discuss the role of the moderator in public discussions.
-
Franklin on vacation for several weeks. While Franklin was away his neighbour, Samantha, decided to weed and maintain his large vegetable and flower gardens, as well as cut the grass in his large...
-
Three forces with magnitudes of 70pounds, 40 pounds, and 60 pounds act on an object at angles of 30, 45, and 135, respectively, with the positive x-axis. Find the direction and magnitude of the...
-
Percentages of adults surveyed who plan to attend a Halloween party this year are shown in Table 48 for various age groups. Let y be the percentage of adults at age x years who plan to attend a...
-
(3/4)3 Perform the indicated operations by hand.
-
In 2013, total MasterCard debit card purchases were $491.1 billion, up 9.5% from 2012. What were the total MasterCard debit card purchases in 20 12?
-
A pair of \(20^{\circ}\) full involute spur gears having 40 and 60 teeth of module \(4 \mathrm{~mm}\) are in mesh. The smaller gear rotates at \(1440 \mathrm{rpm}\). Find (a) sliding velocity at...
-
Calculate the minimum number of teeth on a pinion to avoid interference to have a speed ratio of 2.5:1. The pressure angle is \(20^{\circ}\) and addendum of one module of gear may be used.
-
The path of contact in involute gears is (a) a straight line (b) involute path (c) curved path (d) circle.
Study smarter with the SolutionInn App