Mark to Market is also known as "Fair Value" accounting. C) $500,000. Explanation: The initial carrying amount of $8,800,000 is less than the face amount of $10,000,000. A) The stated interest rate is greater than the market interest rate. Answer: D Finally, there are also callable bonds. Net income 7,000 Bond 1 Bond 2 Bond 3 Bond 4 D) The future value of the face amount plus the future value of the periodic interest payments. For more information, or to apply, please contact: Howard Newman. Explanation: $600,000/$220,000 = 2.73 (rounded). 12/31/2025 7,000 6,057 943 100,000 B) A debit of $6 million to a loss account. N = 10 years 2 periods each year = 20 periods. ^$50,000 10% 1/2 year = $2,500. b. Tax expense 2,000 12/31/2023 7,000 7,961 961 200,000 160) In calculating the issue price of a bond, the portion associated with the principal is calculated using which time value factor? The market rate of interest for a bond issue that sells for more than its face value is * a. - Sold at a premium because the s; When bonds sell for more than the maturity value (a premium), the market rate of interest is: a. The recent move in higher rates means that the earnings yields of the S&P 500 should rise as well - or effectively lower the PE ratio. Record keeping is simple because all bondholders get the same deal. C) $104,376. The issuing company can redeem callable bonds before the maturity date according to a schedule in the bond's terms. d. bond coupon. Interest payments are made semi-annually. 108) A bond issued at a premium indicates that at the date of issue: Similarly, rising interest rates will result in more bonds trading at a discount of par value. b. A) $12,000. i = 7%/2 semi-annual periods = 3.5% CHAT. B) $3,500,000. A quick look at some of the variations highlights this flexibility. 12/31/2023 7,000 7,961 961 200,000 Total liabilities (end of year) 24,000 C) 5%. 131) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. 06/30/2021 $ 250,000 $ 220,000 $ 30,000 5,470,000 A) A debit of $3 million to a loss account. C) $833.33 D) The second year's interest expense would have been less. B) $440,463. i = 12%/2 semi annual periods = 6% At what amount do bonds sell for if the stated rate is equal to the market rate? One of the more interesting options companies have is whether to offer bonds backed by assets. A) This feature allows the issuer to repay the bonds before their scheduled maturity date. B) Interest. The market rate for this type of bond is 8%. A) Future value of $1. $ 46,320 B) 0.73. What is the annual market interest rate on the bonds? X2's accountant has projected the following amortization schedule from issuance until maturity: B) Sold for the $500,000 face amount plus $10,000 of accrued interest. A) $10,000,000. 103) The rate quoted in the bond contract used to calculate the cash payments for interest is called the: Bond financing is often less expensive than equity and does not entail giving up any control of the company. 01/01/2021 $ 5,500,000 THA's accountant has projected the following amortization schedule from issuance until maturity: D) Cannot be determined from the given information. Answer: C Although most gyms are closed on holidays, if you are a member of Anytime Fitness, you can do just that. The Reserve Bank of India (RBI) has fixed dates for the premature withdrawal of several tranches of sovereign gold bonds (SGB). B) A credit of $3 million to a gain account. A) $693,103. Assume, for instance, that the contract rate for a bond issue is set at 12%. b. decreases the amount of interest expense A) Increase assets. 62) Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. A) $537,194. B) $3,000 gain. A) Face amount. 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 D) The answer cannot be determined from the information provided. The prime rate. A) 0.67. Explanation: $554.15 18.04555* = $10,000 (rounded) * PV of ordinary annuity of $1 (n=20; i=1%). She made connections at the University of Puget Sound. A portion of the bond amortization schedule appears below: More than the rate stated on the face of the bond, Less than the rate . B) Lease payments often are lower than installment payments. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. In 2020, Sebi has come out with a framework for social stock exchange so that social enterprises can get more avenues to raise funds. A) No gain or loss. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value MLS # 20098942 Stated Rate of Return 5 % 7 % 12 % 10 % D) $500,000. C) 5%. 130) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. C) Remains the same. B) Leasing. Oil prices rose more than 1.5% on Tuesday, erasing the previous session's losses, as hopes for a strong economic rebound in China offset worries about U.S. interest rate hikes dragging down . A. Answer: B Explanation: $200,000 5% 1/12 = $833.33 interest expense. D) Supported by specific assets pledged as collateral by the issuer. C) 2.73. B) The present value of the interest only. Each of the bonds has a facevalue of $100,000 and each matures in 10 years. The bond price is called the PPE and there is an abbreviation for the semiannual coupon. Net income 7,000 B) Face amount times the market interest rate. 70) Which of the following is not a reason why some companies lease rather than buy? and not a previous value or future value. A) $62,000. 152) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. 102) Given the information below, which bond(s) will be issued at a premium? U.S. companies with the highest credit ratings sold a record $144 billion of debt securities so far in February to get ahead of further potential interest rate hikes, meeting strong demand from . Explanation: $440,000/$8,800,000 = 5% 2 payments per year = 10%. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value C) Sold at a discount because the stated interest rate was higher than the market rate. 12/31/2021 250,000 218,800 31,200 5,438,800 *Table 2: C) 6%. From a corporate perspective, perhaps the most attractive feature of stock issuance is that the money does not need to be repaid. 139) Bronco High School issues $10 million in bonds on January 1, 2021, that pay interest semi-annually on June 30 and December 31. A) $8,800,000. C) Carrying value decreases and interest expense increases. B) 4%. B) 10%. Explanation: $220,000/$5,500,000 = 4% 2 payments per year = 8%. A) Fair value of the underlying asset. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 12/31/2022 300,000 351,337 51,337 8,834,770 Supranational entities refer to global entities that are not based in a specific nation. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value *Table 2: Answer: B A $500,000 bond issue sold for 98. We reviewed their content and use your feedback to keep the quality high. B) Secured only by the "full faith and credit" of the issuing corporation. Bond interest rate is related to current interest rates and the perceived risk of the issuer. 94) For a bond issue that sells for more than the bond face amount, the stated interest rate is: 12/31/2021 $ 7,000 $ 6,253 $ 747 103,465 PM Modi receives grand welcome during his roadshow in Karnataka's Belagavi. B) $1,000,000 B) Is contained in the balance sheet. This wide selection also means that investors should do their homework. Use (PV of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. B) The issuing company will always report a non-operating gain. B) Its stated rate was higher than the prevailing market rate of interest on similar bonds. 12/31/2024 7,000 6,110 890 100,943 B) $46,320. Answer: A A) $5,000,000. $ 538,972 Explanation: FV ($500,000); PMT ($15,000); I (2.5%); N (20 periods) = PV ($538,973). $ 95,842 A) 4%. Bonds are getting sold-off into March 23 -Bond Bytes-22nd Feb 2023 https://lnkd.in/dxYCNPJT #rbi #gsec #bondmarkets #psubonds. Interest payments are made semi-annually. B) $46,320. B) Present value of $1. The bonds pay interest annually on December 31 each year. B) Decrease for bonds issued at a discount and increase for bonds issued at a premium. A) August 1, 2021 12/31/2022 7,000 6,208 792 102,673 **Table 4: A) The final carrying value is not zero in either amortization schedule. Net income 54,000 A) Face amount. B. Decreases. B) Bonds issued at more than their face value are said to be issued at a discount. A) Sold at a discount because the stated interest rate was higher than the market rate. A) $625 06/30/2022 7,000 7,855 855 197,225 C) 5%. 61) How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds? A) $42,500. Answer: D C) A premium. C) $359,528. After recording the inception of the lease, the company would report which of the following? Faced with bankruptcy, a bondholder can choose to sell their bonds or hold on, anticipating a reorganization. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 104,212 D) $244,333. ($ in millions) Explanation: Carrying value, $18 million, less cash paid to retire the bonds of $23 million = $5 million loss. Equal to the rate stated on the bond. The investor agrees to give the corporation a certain amount of money for a specific period of time. c. the yield and nominal rates coincide b. bond debenture For what amount would the company record the lease on January 1, 2021 (rounded to nearest whole dollar)? Answer: C Bonds issued at a premium have a bond price of more than 100. The market rate of interest for a bond . Below is a partial bond amortization schedule for the bonds: B) 10%. A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more. The money market is a component of the economy that provides short-term funds. B) 13.5%. A) A credit of $6 million to a gain account. A) Matures on a single date. 100) Given the information below, which bond(s) will be issued at a premium? 180) Financial leverage is best measured by which of the following ratios? B) Its stated rate was higher than the prevailing market rate of interest on similar bonds. D) Bonds 2 and 4. If the monthly payment is $3,220.99, what is the note's carrying value after the first month's payment is made on January 31, 2021? D) Increase assets and liabilities. Most locations charge an initiation fee as well as an annual membership fee. Total assets (end of year) 820,000 C) Matures in installments. $2,500^ 7.36009** = $ 18,400 (rounded) 06/30/2021 $ 400,000 $ 440,000 $ 40,000 8,840,000 06/30/2022 7,000 7,855 855 197,225 Explanation: $7,000/[($52,000 + $60,000)/2] = 12.5%. B) 26.0 times. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value d. Lower than the rate stated on the bond. C) $538,972. 168) Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. 2. 51) Profits generated by the company are a(n): 52) The mixture of liabilities and stockholders' equity a business uses is called its: 53) Which of the following is not a true statement? 12/31/2024 7,000 6,110 890 100,943 06/30/2022 300,000 349,363 49,363 8,783,433 Brooklyn, NY, 11219. Credit quality stems from a combination of the issuing companys fiscal health and the length of the loan. Interest expense 3,000 C) Increase stockholders' equity. B) Leverage enables a company to earn a higher return using debt than without debt. 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