Bonds
What is Special Agent 007's favorite financial instrument?
Bonds...
What is the difference between a long-term note and a short-term note? Looking for time period.
What is the date and time of your final exam in this class?
12:30: 5/6 @ 11:00am
2:00: 5/3 @ 2:00pm
On January 1, GNB issues bonds that have a $4,000,000 par value, mature in 20 years, and pay 10% interest semiannually on June 30 and December 31. The bonds are sold at par.
Compute the semiannual interest expense.
$200,000
GNB issues bonds at par dated January 1, 2021, that have a $3,400,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31.
Record the entry for the issuance of bonds for cash on January 1.
dr Cash 3.4 million
cr B/P 3.4 million
What is par?
"Face Value" the amount the bond issuer agrees to pay at maturity and the amount on which interest is based
What makes a note payable different from a bond in terms of lenders?
Note payable has one lender (usually); bonds trade on an active market (many lenders)
What is the extra credit event this week?
Accounting Film Festival
On January 1, GNB issues bonds that have a $4,000,000 par value, mature in 20 years, and pay 10% interest semiannually on June 30 and December 31. The bonds are sold at par.
The bonds are issued at 102. Compute the premium.
$80,000
GNB issues bonds at par dated January 1, 2021, that have a $3,400,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31.
Record the entry for the first semiannual interest payment and the second semiannual interest payment.
dr Interest Expense 153,000
cr Cash 153,000
How is interest expense computed on a bond? Looking for the formula.
Par value x bond interest rate (contract rate)
How is interest expense computed on a note payable? Looking for the formula.
Beginning of period note balance x contract rate
What percentage of reviews must the class complete to get bonus points on the final?
85%
On January 1, GNB issues bonds that have a $4,000,000 par value, mature in 20 years, and pay 10% interest semiannually on June 30 and December 31. The bonds are sold at par.
The bonds are issued at 98. Compute the discount.
80,000
GNB issues bonds at par dated January 1, 2021, that have a $3,400,000 par value, mature in four years, and pay 9% interest semiannually on June 30 and December 31.
Record the entry for the maturity of the bonds on December 31, 2024 (assume semiannual interest is already recorded).
dr B/P 3.4 million
cr Cash 3.4 million
Bonds are a form of equity financing (T/F).
False - debt financing
Payments on an installment note are comprised of what to components?
Interest Expense and Principal
Should you use the grade calculator on AsULearn to compute your grade and not the raw scores posted on AsULearn (Yes/No)
YES!
On January 1, 2021, GNB borrows $100,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of $29,523, consisting of accrued interest and principal on December 31 of each year from 2021 through 2024. Fill out the following table.
Compute the interest expense in Year 2 (2022).
5,423
Assume Goliath National Bank issues bonds with a $100,000 par value, a 12% contract rate, and a two-year life. The bonds sell at 103.600 ($103,600). What journal entry should Goliath National Bank make to record the issuance?
dr Cash 103,600
cr Premium 3,600
B/P 100,000
If the market rate is higher than the contract rate bonds will trade at a...
Discount
The portion of an installment note payment that goes towards principal is computed as?
Payment less interest expense.
What is my middle name?
Patrick. Shows on the screen everyday...
On January 1, 2021, GNB borrows $100,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of $29,523, consisting of accrued interest and principal on December 31 of each year from 2021 through 2024. Fill out the following table.
Compute the portion of the payment that went to principal in Year 3.
$25,787
GNB makes a 23, 282 payment on an installment note. 4,800 was accrued interest and the remaining 18,482 was on principal. Prepare the journal entry to record this payment.
dr Int Exp 4,800
N/P 18,482
cr Cash 23,282