Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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Chapter 11, Problem 1R
The University Club recently issued $1,500,000 of 10-year, 9% bonds at an effective interest rate of 10%. Bond interest is payable annually.
You have been asked to calculate the issuance price of the bonds and prepare amortization schedules for any discount or premium. The worksheet BONDS has been provided to assist you. Note that the worksheet contains a scratch pad at the bottom that has been preprogrammed to automatically compute and display the relevant
Expert Solution & Answer
To determine
Calculate the issue price of bonds and prepare amortization schedules for any discount or premium.
Explanation of Solution
Calculate the issue price of bonds and prepare amortization schedules for any discount and premium.
Table (1)
The formulae for the above calculation are as follows:
Figure (2)
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Students have asked these similar questions
For each of the following three examples, provide the journal entry that the company would
make on the date the bonds are issued. Note that you will need to do a present value
calculation to determine the cash proceeds from each bond issue. You can round your answer
to the nearest dollar.
1. Andersson Inc. issues 8-year bonds with a face value of $50,000,000 and a stated annual
interest rate of 6%. The bonds pay interest semiannually on June 30 and December 31. The
annual market rate of interest on the date of issue is 8%.
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bonds have
a carrying value of $990,000. We call these bonds prior to maturity on September 30.
Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in
the debit or credit columns.
View transaction list
Journal entry worksheet
Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require
the payment of a call premium of $10,000. The bonds have a carrying value of
$990,000. We call these bonds prior to maturity on September 30.
Note: Enter debits before credits.
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Compute bond proceeds, amortizing premium by interest method, and interest expense
Ware Co. produces and sells motorcycle parts. On the first day of its fiscal year, Ware issued $37,000,000 of three-year, 11% bonds at a market (effective) interest rate of 10%, with interest payable semiannually. This information has been collected in the Microsoft Excel
Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
Compute the following:
A. The amount of cash proceeds from the sale of the bonds. Round your answer to the nearest dollar.
B. The amount of premium to be amortized for the first semiannual interest payment period, using the interest method. Round your answer to the nearest dollar.
C. The amount of premium to be amortized for the second semiannual interest payment period, using the interest method. Round your answer to the nearest dollar.
D. The amount of the bond interest expense for the first year. Do not…
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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