On January 1, 2021, Bobcat Company sold 10% bonds having a face value of $300,000 to...

  

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On January 1, 2021, Bobcat Company sold 10% bonds having a face value of $300,000 to yield 12% market rate. The bonds are dated January 1, 2021 and mature in 5 years, with interest payable semiannually on July 1 and January 1 of each year, starting July 1, 2021. Instructions Prepare complete bond amortization schedules for Bobcat using the Excel templates on the following tabs. Tab 1: Assume Bobcat allocates interest and unamortized discount or premium on the EFFECTIVE-INTEREST (EI) basis. Make sure to fill in dates as well. Tab 2: Assume Bobcat allocates interest and unamortized discount or premium on the STRAIGHT-LINE (SL) basis. Make sure to fill in dates as well. Notes: Compute the present value of the bond using Excel formulas. All highlighted cells should be formulas. For example, cash interest payment should have something like: 300,000* 10%*6/12 Questions Tab: Using your tables, answer the related questions on the question tab. A B D. E Cash Carrying 1 2 Payment Interest Interest Amortization Value Payment Of Bonds Date Number Expense Amount 4 Start 5 1 6 7 3 8 4 9 10 11 7. 12 8. 13 14 10 15 16 $0 $0 $0 17 18 19 A B D. E F 1 Cash Carrying 2 Payment Interest Interest Amortization Value Payment Of Bonds 3 Date Number Expense Amount 4 Start 5 1 6 7 3 8 4 9 10 11 7. 12 8. 13 9. 14 10 15 16 $0 $0 $0 17 18 A B D F G H K M 1 Questions - Excel Project Assignment 2 USE the information from Tabs 1 and 2 to answer the following two questions. 3 4 From the bond issuer's perspective, (1) Which method of amortization causes interest expense to be higher in the beginning of the bond's term? Explain why? 6. 7 8. 9. 10 11 12 13 14 15 16 17 (2) Which method would be preferred to smooth income? Explain why? 18 19 20 21 On January 1, 2021, Bobcat Company sold 10% bonds having a face value of $300,000 to yield 12% market rate. The bonds are dated January 1, 2021 and mature in 5 years, with interest payable semiannually on July 1 and January 1 of each year, starting July 1, 2021. Instructions Prepare complete bond amortization schedules for Bobcat using the Excel templates on the following tabs. Tab 1: Assume Bobcat allocates interest and unamortized discount or premium on the EFFECTIVE-INTEREST (EI) basis. Make sure to fill in dates as well. Tab 2: Assume Bobcat allocates interest and unamortized discount or premium on the STRAIGHT-LINE (SL) basis. Make sure to fill in dates as well. Notes: Compute the present value of the bond using Excel formulas. All highlighted cells should be formulas. For example, cash interest payment should have something like: 300,000* 10%*6/12 Questions Tab: Using your tables, answer the related questions on the question tab. A B D. E Cash Carrying 1 2 Payment Interest Interest Amortization Value Payment Of Bonds Date Number Expense Amount 4 Start 5 1 6 7 3 8 4 9 10 11 7. 12 8. 13 14 10 15 16 $0 $0 $0 17 18 19 A B D. E F 1 Cash Carrying 2 Payment Interest Interest Amortization Value Payment Of Bonds 3 Date Number Expense Amount 4 Start 5 1 6 7 3 8 4 9 10 11 7. 12 8. 13 9. 14 10 15 16 $0 $0 $0 17 18 A B D F G H K M 1 Questions - Excel Project Assignment 2 USE the information from Tabs 1 and 2 to answer the following two questions. 3 4 From the bond issuer's perspective, (1) Which method of amortization causes interest expense to be higher in the beginning of the bond's term? Explain why? 6. 7 8. 9. 10 11 12 13 14 15 16 17 (2) Which method would be preferred to smooth income? Explain why? 18 19 20 21

Answer rating: 100% (QA)

Solution Table values are based on Face Amount 300000 Interest Payment 15000 Market Interest rate pe... View the full answer