Sunland Water Company Ltd. needed to raise $69 million of additional capital to finance the expansion of its bottled water facility.After consulting an investment banker, it decided to issue bonds. The bonds had a face value of $69 million and an annual interest rateof 4.5%, paid semi-annually on June 30 and December 31, and will reach maturity on December 31, 2034. The bonds were issued at96.1 on January 1, 2025, for $66,309,000, which represented a yield of 5%.(b)Show the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered.Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry beforecredit entry.)Account Titles and ExplanationDebitCredit

In the bond market, where investors trade existing bonds, bonds can be purchased and sold. Bond…

Answered: Sunland Water Company Ltd. needed to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 20P

See similar textbooks

Similar questions

Hassan Mustafa realized that when the bonds mature on January 20, 2041, there must be $5,200,000 available to repay the bondholders. To have enough money on hand to meet this obligation, He suggested that ScanSoft set up a sinking fund (an interest-bearing account into which payments are made at regular intervals to provide a desired sum of money at a specified future time) using a specially designated savings account. The company earns interest of 1.6% compounded semi-annually on this sinking fund account. ScanSoft began making semi-annual payments to the sinking fund on July 20, 2021.ScanSoft issued the bonds, sold them all to the investment dealer, and used the money raised to continue its research and development.1. How much would an investor have to pay for one of these bonds to earn 4.4% compounded semi-annually?2.3. Suppose ScanSoft discovers on January 20, 2031, that it can earn 2.5% interest compounded semi-annually on its sinking fund account.a. What is the balance in the…
Ardvark plans to raise the capital by issuing $210,000 of 7.5%, six-year bonds on January 2, 2020. The bonds pay interest semiannually on June 30 and December 31. The market rate is 8%. The company receives $208,476 when the bonds are issued.The company also issues a mortgage payable for $450,000 on January 2, 2020. The proceeds from the mortgage will be used to construct the new building. The mortgage requires annual payments of $45,000 plus interest for ten years, payable on December 31. The mortgage interest rate is 8%. 1) Will the bonds issue at face value, a premium, or a discoutn? 2) Record teh following transactions. Include dates and round to the nearest dollar. Omit explainations. 2a) Cash recevied from the bond issue. 2b) Cash received from the mortgage payable. 2c) Semiannual bond interest payments for 2020. Amortize the premium or discount using the straight-line amortization method. 2d) Payment on the mortgage payable for 2020. 2e) Retirement of bond at maturity on…
Ivanhoe Desalination Ltd. needed to raise $165,000,000 of additional capital to finance the design, development, and construction of its water desalination facility. Ivanhoe decided to issue bonds that pay interest of $2,475,000 on each of March 31 and September 30 and that will reach maturity on September 30, 2037. The bonds were issued at 93.2 on October 1, 2024, for $153,780,000, which represented a yield of 3.66%.
On January 1, 2020, Patrick Corporation issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with semi-annual deposit every June 30 and December 31, starting June 30, 2020 up to December 31, 2024 in time for the maturity of the bonds.The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required semi-annual deposit to be able to accumulate a total of P10 million is P795,045.27.How much is the bond sinking fund balance at December 31, 2020 after making the required semi-annual deposits in the fund? A. P 795,045.27 B. P 834,797.53 C. P1,669,595.00 D. PI,629,842.80
On June 1,2024 , Blossom Bottle Company sold $3,720,000 in long-term bonds for $3,262,833. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to 0 decimal places, e.g. 25,000.) Date 61/24 531/25 531/26 531/27 5/31/28 Carrying Amount Debit Interest Expense Credit Bond Discount Bonds $ $ $
On June 1, 2024, Sheridan Bottle Company sold $3,420,000 in long-term bonds for $2,999,701. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to 0 decimal places, e.g. 25,000.) Credit Bond Discount Date 6/1/24 5/31/25 5/31/26 5/31/27 5/31/28 $ Credit Cash Debit Interest Expense Carrying Amou $ M W Ở Aca QL Acc Qui Acce
On June 1, 2024, Cullumber Bottle Company sold $3,840,000 in long-term bonds for $3,368,086. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method. (a) Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Include only the first four years. (Round answers to O decimal places, e.g. 25,000.) Date 6/1/24 5/31/25 5/31/26 5/31/27 5/31/28 LA Credit Cash LA Debit Interest Expense 1 $ LA Credit Bond Discount 11 Carrying Amoun $
On January 1, 2023, Larkspur Corporation purchased a newly issued $1,500,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Larkspur's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) the price paid for the bond is $ 1,421,367.95
Prepare an amortization schedule for the bond. (Round answers to 2 decimal places, e.g. 52.75.) $ $ ● ● ● Cash Received ● January 1, 2023 June 30, 2023 October 31, 2023 $ $ Date Interest Revenue Prepare the journal entries on the books of Marin Corporation for each of the following dates. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the amount is entered. Do not indent manual If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record entries in the order displayed the problem statement. List all debit entries before credit entries.) $ $ Account Titles and Explanation Discount Amortization December 31, 2023 December 31, 2025 (two entries) one for interest and one for maturity of bond $ Amortized Cos (Present Value Debit 125! 1325
On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Marigold's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) PV S
On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Marigold's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2 - PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) PV $
On December 31, 2024, L Incorporated had a $3,200,000 note payable outstanding, due July 31, 2025. L borrowed the money to finance construction of a new plant. L planned to refinance the note by issuing long-term bonds. Because L temporarily had excess cash, it prepaid $670,000 of the note on January 23, 2025. In February 2025, L completed a $4,700,000 bond offering. L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2025. On March 13, 2025, L issued its 2024 financial statements. What amount of the note payable should L include in the current liabilities section of its December 31, 2024, balance sheet? Multiple Choice$3,200,000$670,000$0$2,530,000

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS