BE15.3 (LO 2) AP Video Carvel Corp. issued $500,000 of 10 - year, 5% bonds with interest payable semi- annually. How much did Carvel receive from the sale of these bonds if the market interest rate was (a) 4%, ( b) 5%, and (c) 6%

BE15.3 (LO 2) AP Video Carvel Corp. issued $500,000 of 10 - year, 5% bonds with interest payable semi- annually. How much did Carvel receive from the sale of these bonds if the market interest rate was (a) 4%, ( b) 5%, and (c) 6%

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 2PB: Charleston Inc. issued $200,000 bonds with a stated rate of 10%. The bonds had a 10-year maturity...

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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

BE15.3 (LO 2) AP Video Carvel Corp. issued $500,000 of 10 - year, 5% bonds with interest payable semi-
annually. How much did Carvel receive from the sale of these bonds if the market interest rate was (a) 4%, (
b) 5%, and (c) 6%

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Step 1: Introduction to bonds:

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Step 2: Requirement a- Calculation of selling price of bonds when the market rate of interest is 4%:

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Step 3: Requirement b- Calculation of selling price of bond if market rate of interest is 5%.

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Step 4: Requirement c- Calculation of selling price of bond based on market rate of interest of 6%:

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