Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Chapter 11, Problem 3R
To determine
Compute the
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There are certain patterns we should expect to see on a bond amortization table. Complete the following
statements regarding these patterns.
Item
Statements
A. Assuming a term bond is issued at a premium, the cash interest payment calculated every
period should:
B. Assuming a term bond is issued at a premium, the interest expense amount calculated every
period using the effective interest method should be
C. Assuming a term bond is issued at a premium, the carrying value over time should be
D. Assuming a term bond is issued at either a premium or a discount, the carrying value on the
issuance date should be equal to the bond's
If bonds are redeemed on maturity date, any premium or discount
a. Is carried forward and written off in the same manner as that used prior to the maturity date.
b. Should be used to calculate the gain or loss resulting from the maturity of the bonds.
c. Should be written off directly to a bond retirement account as the bond will be redeemed.
d. Will be fully amortized as its amortization period is designed to coincide with the life of the bond issue.
Describe a way to estimate the inflation premium(IP) for a t-year bond.
Chapter 11 Solutions
Excel Applications for Accounting Principles
Ch. 11 - The University Club recently issued 1,500,000 of...Ch. 11 - The bond pricing formula utilizes the NPV (Net...Ch. 11 - Prob. 3RCh. 11 - Prob. 4RCh. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Use the worksheet to compute the bond issue price...Ch. 11 - Prob. 7RCh. 11 - a. Reset the Data Section to its initial values....
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- From page 9-2 of the VLN, how do you determine the annuity cash flow (the bond interest payment) from an annual bond? Group of answer choices A. Bond payable x stated rate B. Bond liability x stated rate C. Bond payable x market rate D. Bond liability x market ratearrow_forwardReview the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) More Info - X Jaid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $86.0000. 1. Seven-year bonds payable with face value of $86,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $86.000. 2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $77,981. 3. Same bonds payable as in assumption 1,…arrow_forwardUse the worksheet to compute the bond issue price if the effective interest rate is 9%. Bond issue price _____arrow_forward
- Review the following three bonds payable assumptions: (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) x lid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $84,000. More Info 1. Seven-year bonds payable with face value of $84,000 and stated interest rate of 10%, paid semiannually. The market rate of interest is 10% at issuance. The present value of the bonds at issuance is $84,000. 2. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $76,167. 3. Same bonds payable as in assumption 1, but…arrow_forwardReview the following three bonds payable assumptions: 1 (Click the icon to view the bond assumptions.) Journalize issuance of the bond and the first semiannual interest payment under each of the three assumptions. The company amortizes bond premium and discount by the effective-interest amortization method. Explanations are not required. (Record debits first, then credits. Exclude explanations from any journal entries. Round your final answers to the nearest whole dollar.) O More Info semiannually. 1. Ten-year bonds payable with face value of $89,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance. The present value of the bonds at issuance is $89,000. 2. Same bonds payable as in assumption 1, but the market interest rate is 16%. The present value of the bonds at issuance is $80,301. 3. Same bonds payable as in assumption 1, but the market interest rate is 12%. The present value of the bonds at issuance is $99,226. Print Donearrow_forwardSelect the correct answer to each of the following statements. A. Increase B. Decrease C. Remain Constant 1. The amount of interest expense will _______ each payment period for a bond issued at a discount. 2. When a bond is issued at a discount, the cash interest payment will _________ over the life of the bond. 3. When a bond is issued at a premium, the carrying value of the bond will _______ over the life of the bond.arrow_forward
- Suppose you are provided with the following table of spot rates of different maturity bonds: Year Spot rate 1 8 2 9 3 7 4 8 5 10 Calculate, respectively, one period forward rates of these bonds for year 2, year 3 and year 4.arrow_forwardIf the straight-line method of amortization of bond premium or discount is used, which of the following statements is true? Group of answer choices Total interest expense will increase over the life of the bonds with the amortization of bond discount. Total interest expense will increase over the life of the bonds with the amortization of bond premium. Total interest expense will decrease over the life of the bonds with the amortization of bond discount. Total interest expense will remain the same over the life of the bonds with the amortization of bond discount.arrow_forwardPlease see attached. Definitions: Coupon is the regular interest payment of a bond. Coupon rate is the interest rate for the bond coupons, expressed in annual percentage terms. Par value is the principal amount to be repaid at the maturity of the bond. Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity. Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.arrow_forward
- From page 9-3 of the VLN, when determining the issue price of a bond, which interest rate would you use? Group of answer choices A. Stated rate B. Market rate C. Nominal rate D. Compound ratearrow_forwardExplain how each of the columns in an amortization schedule is calculated, assuming the bonds are issued at a discount. How is the amortization schedule different if bonds are issued at a premium?arrow_forwardCalculate the accrued interest (in $) and the total proceeds (in $) of the bond sale. (Round your answers to the nearest cent.)arrow_forward
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