on An index-linked bond of £11,000 nominal was issued on 1st July 2016 and it was repaid at 114% on 1st July 2020. Interest on the bond was payable at each anniversary (i.e. in July of each year) at a rate of 5.1% per annum. An investor liable to income tax at a rate of 31% has purchased the bond at issue and held it to redemption. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. The value of the inflation indexes at various dates during the term of the loan were as follows: Inflation indexes for 2016-2020 2016 2017 2018 2019 2020 January 103.6 109.2 117 123.5 129.3 July 101.8 108.2 112.1 120.5 125.5 Calculate the price paid at issue for the bond, given that the investor has achieved an effective money yield of 6.2% per annum from this investment.

on An index-linked bond of £11,000 nominal was issued on 1st July 2016 and it was repaid at 114% on 1st July 2020. Interest on the bond was payable at each anniversary (i.e. in July of each year) at a rate of 5.1% per annum. An investor liable to income tax at a rate of 31% has purchased the bond at issue and held it to redemption. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. The value of the inflation indexes at various dates during the term of the loan were as follows: Inflation indexes for 2016-2020 2016 2017 2018 2019 2020 January 103.6 109.2 117 123.5 129.3 July 101.8 108.2 112.1 120.5 125.5 Calculate the price paid at issue for the bond, given that the investor has achieved an effective money yield of 6.2% per annum from this investment.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

See similar textbooks

Similar questions

On December 31, 2018, Interlink Communications issued 6% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2048. Interest is payable annually on each December 31, beginningin 2019. Determine the price of the bonds on December 31, 2018, assuming that the market rate of interest forsimilar bonds was 7%.
on An index-linked bond of £11,000 nominal was issued on 1st July 2016 and it was repaid at 114% on 1st July 2020. Interest on the bond was payable at each anniversary (i.e. in July of each year) at a rate of 5.1% per annum. An investor liable to income tax at a rate of 31% has purchased the bond at issue and held it to redemption. Interest and capital payments were indexed by reference to the value of an inflation index with a time lag of 6 months. The value of the inflation indexes at various dates during the term of the loan were as follows: Inflation indexes for 2016-2020 2016 2017 2018 2019 2020 January 103.6 109.2 117 123.5 129.3 July 101.8 108.2 112.1 120.5 125.5 Calculate the price paid at issue for the bond, given that the investor has achieved an effective money yield of 6.2% per annum from this investment.
On January 1st, 2017, a nominal £13,000 index-linked bond was issued, and on January 1st, 2019, it was repaid at a rate of 107%. The bond's interest was paid at a rate of 5.6% annually in half-yearly arrears, (January and July of each year)The bond was bought at issue by an investor who is subject to a 34% income tax liability and kept it until redemption.With a six-month time lag, the value of an inflation index was used to index capital and interest payments. The following were the inflation index values at different points during the loan term: Inflation indexes for 2016 - 2019 (on January 2016=102.3, on January 2017=110.4, on January 2018=123 and on January 2019=130.8) (on July 2016=105.1, on July 2017=116.4, on July 2018=127.5 and on July 2018=136.1) Calculate the price paid at issue for the bond, given that the investor has achieved an effective money yield of 6.7% per annum from this investment. (correct answer=15826.72) (no tables, only formulas)
Debond Corp. issues £1,000,000 worth of fi ve-year bonds, dated 1 January 2010, whenthe market interest rate on bonds of comparable risk and terms is 6 percent. Th e bondspay 5 percent interest annually on 31 December. What are the sales proceeds of thebonds when issued, and how is the issuance refl ected in the fi nancial statements?
On 1/6/2017, EB issued a subscription bond worth 400,000 dinars at an interest rate of 8% annually, and for a period of 10 years (that is, the bond is returned after this period), while the market interest rate on the date of issuance was 10%. This interest is paid annually on 31/5/ of each year. The company also uses the real interest method to amortize the issue difference. Required: Prepare journal entries to record each of the following: Issuance of bonds. Interest is paid and accrued for the first four years. Amortization schedule. Proof of entries in the investor's books until May 31, 2018.
On January 1, 2019, Ellison Co. issued 8-year bonds with a face value of €1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. compute the present value of interest and the principle amount
The following are two independent situations. 1. 2. Crane plc. redeemed £121,000 face value, 10% bonds on June 30, 2020, at 102. The carrying value of the bonds at the redemption date was £108,500. The bonds pay annual interest, and the interest payment due on June 30, 2020, has been made and recorded. For each independent situation above, prepare the appropriate journal entry for the redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) 1. Tastove Inc. redeemed £155,000 face value, 11% bonds on June 30, 2020, at 96. The carrying value of the bonds at the redemption date was £157,650. The bonds pay annual interest, and the interest payment due on June 30, 2020, has been made and recorded. No. Account Titles and Explanation 2. Debit Credit NAR
Tuku limited issued a 5% K70 million bond on 1/1/2018. The bond attract an issue costs of 10% as well as discount of 2%. The effective interest rate is 8%. Required to explain and show how the above instrument will be accounted for the years 2018 to 2020. The company has a year that ends in December
On April 1, 2019, Company Y issued a 10-year bond for $5,265,750. The bonds have a stated rate of 5% and pay interest semi- annually on 01/01 and 01/07. The bonds were issued at 102. How much was the face value of the bonds?
On January 1, 2024, Burton Sales issued $23,000 in bonds for $35,800. These are ten-year bonds with a stated rate of 9% and pay semiannual interest. Burton Sales uses the straight-line method to amortize the bond premium. After the first interest payment on June 30, 2024, what is the balance of Premium on Bonds Payable? (Round your intermediate answers to the nearest dollar.) a. debit of $800 b. credit of $12,160 c. credit of $235 d. debit of $14,400
Debond Corp. issues £1,000,000 face value of fi ve-year bonds, dated 1 January 2010,when the market interest rate is 6 percent. Th e sales proceeds are £957,876. Th e bondspay 5 percent interest annually on 31 December.1 . What is the interest payment on the bonds each year?2 . What amount of interest expense on the bonds would be reported in 2010 and 2011using the eff ective interest rate method?3 . Determine the reported value of the bonds (i.e., the carrying amount) at 31 December 2010 and 2011, assuming the eff ective interest rate method is used to amortisethe discount.4 . What amount of interest expense on the bonds would be reported under thestraight-line method of amortising the discount?
Diaz Company issued $139,000 face value of bonds on January 1, 2018. The bonds had a 7 percent stated rate of interest and a ten-year term. Interest is paid in cash annually, beginning December 31, 2018. The bonds were issued at 96. The straight-line method is used for amortization. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018. Determine the amount of interest expense reported on the 2018 income statement. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2019. Determine the amount of interest expense reported on the 2019 income statement