Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated interest rate 12%...
Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated interest rate 12% annual Interest paid 6% semiannual Market interest rate 10% Create Journal Entries
Homework Answers
Correct Answer:
|
Date |
General Journal |
Debit |
Credit |
|
1/1/2020 |
Cash |
$ 53,232 |
|
|
premium on notes payable |
$ 3,232 |
||
|
Notes payable |
$ 50,000 |
Working:
|
semi-Annually |
Formula Applied |
|
|
Face Value of Notes payable |
$ 50,000 |
|
|
Interest Semi-Annually @ 12% |
$ 3,000 |
(Face Value of Notes payables * Coupon rate ) / 2 |
|
Semi-Annual Effective interest Rate r = ( 10%) |
0.0500 |
10.0% |
|
Time Period (n) 10 years |
8.00 |
4 |
|
Present Value of Face Value of Notes payable |
$ 33,842 |
Face Value/(1+r%)^2n |
|
Present Value of Interest payment |
$ 19,390 |
Interest * ((1-(1+r)^-n)/r) |
|
Issue Price Of Notes payable |
$ 53,231.6 |
PV of Face value of notes payable + PV of Interest Paid Annually |
|
Premium or (Discount) |
$ 3,232 |
Issue Price - Face Value of Notes payables |
End of Answer.
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Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated
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Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated interest rate 12%...
Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated interest rate 12% annual Interest paid 6% semiannual Market interest rate 10% Calculate present value of bonds
Issue Date Jan 1 2020 Maturity Date Jan 1 2024 Par 50000 Stated interest rate 12%...
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