Homework Answers
Answer to Question 13:
Redemption Price of Bond : $105
Therefore it can be assumed that FV of a unit of Bond is $100.(As
it is not given in Question)
Proceeds from issue of Bond= $5,00,000
No. of units of Bond= $5,00,000/100= 5000 units
Price paid at the time of Bond Calling = $105 per unit of
Bond
Premium on Bond Call = Call Price-Issue Price= $105-$100 = $5
Therefore Loss on Bond Calling = 5000 units* $5 = $25,000 (Option A)
Answer to Question No. (14-16)
Basic Information:
Face Value of Bonds issued: $1,00,000
Proceeds (Cash) from issue of Bonds: $87,500
Discount on issue of Bonds: Face Value of Bonds-Proceeds from Bond
issue = $1,00,000-$87,500 = $12,500
Due Dates for Interest Payment: June 30th and December 31st means Semi-Annual Interest Payment
Bond Tenure: 10 Years
Discounts is amortized on a Straight Line Basis: Discount on issue of Bond/Bond Tenure=$12,500/10=$1,250
Answer Q14
Interest is always paid on Face Value of the Bond at the Rate
Contracted.
Therefore, Interest Expense for the Year ended December
31st = 9% of $1,00,000=$9,000 (Option C)
Answer Q15
Total Interest to be paid on each Interest Date= 9%/2 of $1,00,000 = $4,500 (Option C)
Answer Q16
Total Amount to be Reported as Bond Payment Liability on December 31st= $1,00,000 (Option B)
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