177) A company's balance sheet reports stockholders' equity of $400,000, total liabilities of $600,000, and total assets of $1,000,000. n = 5 years 2 periods each year = 10 periods B) The return on equity ratio. C) 1.50. 149) Tomkin Library System issues $5 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. Answer: B Total assets (end of year) 820,000 06/30/2023 7,000 7,925 925 199,039 142) Bronco High School issues $10 million in bonds on January 1, 2021 that pay interest semi-annually on June 30 and December 31. B) Its stated rate was higher than the prevailing market rate of interest on similar bonds. 12/31/2022 7,000 7,889 889 198,114 a. the stated rate of the bond 97) Seaside issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years. This . What is the issue price of the bond (rounded to nearest whole dollar)? C-Bond's windshield strengthener, C-Bond nanoShield, is a first of its kind solution that protects and strengthens windshields by permeating the glass surface and repairing the microscopic flaws . A) A credit of $6 million to a gain account. Issuing bonds is one way for companies to raise money. What was the BONUS ROUND answer last night? Explanation: What is the amount of the company's total liabilities? D) Supported by specific assets pledged as collateral by the issuer. b. $2,500^ 8.11090** = $ 20,277 (rounded) D) Cannot be determined from the given information. The return on assets for the year is 10%. C) $1,500,000 n = 5 years 2 periods each year = 10 periods. B) Carrying value and interest expense decrease. b) less than the rate stated on the face of the bond. d. Lower than the rate stated on the bond. This button displays the currently selected search type. C) Future value of an ordinary annuity of $1. The bond proceeds are then used to finance that project, and the coupon payments and principal are paid out through the projects revenue. The Wall Street Journal prime rate. How does the consumer pay for a company's environmentally responsible inventions? Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value Perpetual bonds have no maturity date and pay interest forever. Calling a bond is similar to a mortgage borrower refinancing at a lower rate. D) 17.9%. D) The carrying value of bonds will never increase. B) $186,410. C) If the bonds were sold at either a discount or a premium. The THA bonds have a life of: d) The Wall Street Journal prime rate. This becomes the most important figure for estimating the total yield you will receive by the time the bond matures. c. mortgage bonds C) Is a schedule that reflects the changes in the carrying value of the bond over its term to maturity. 90) A bond issue with a face amount of $500,000 bears interest at the rate of 7%. I think you mean "Mark to Market" which is an accounting Governments of all sizes sell bonds to fund daily operations and long-term projects from roads to schools. Explanation: Carrying value, $18 million, less cash paid to retire the bonds of $23 million = $5 million loss. 82) Which of the following definitions describes a secured bond? Explanation: $250,000/$5,000,000 = 5% 2 payments per year = 10%. 12/31/2023 7,000 6,160 840 101,833 C) Bonds 2 and 4. Loans of this type are called unsecured debt. D) $85,000. They function like other bonds, but the issuer can choose to pay them off before the official maturity date. Firms issue bonds when they require funds to finance projects or working capital. A) $83,920. A) A debit of $5 million to a loss account. B) $6,000. B) Cash payment rate. B) A debit of $6 million to a loss account. 01/01/2021 $ 104,212 Office: 1-718-302-0040. ext. Explanation: FV ($500,000); PMT ($15,000); I (3.5%); N (20 periods) = PV ($464,469). The price of bonds has an inverse relationship with interest rates. A) Bonds backed by collateral. 158) The issue price of a bond is equal to: 06/30/2021 $ 250,000 $ 220,000 $ 30,000 5,470,000 The lease payments are $182.53 per month and have a present value of $6,000. The bonds were issued at: The Bay State Banner is changing hands. A) Assuming more debt is always bad for the company. The bond issuer is the borrower, while the bondholder or purchaser is the lender. Sales $ 50,000 Moving along, we've got a bottle of the Bottled in Bond rye. D) Bonds 2 and 4. Total assets (end of year) 820,000 B) Increase in expenses. When a bond issue sells for less than its face value, the market rate of interest is: Higher than the stated rate of interest. technique in which assets are valued at their current market value A) $42,500. A) Future value of $1. Although most gyms are closed on holidays, if you are a member of Anytime Fitness, you can do just that. B) 10%. What is the interest expense on the bonds in 2021? The Wall Street Journal prime rate. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value ^$100,000 6% 1/2 year = $3,000. Explanation: X/$800,000 = 2.5, therefore X = ($800,000 2.5) = $2,000,000. 73) A company is deciding between two options: (1) purchase a piece of equipment for $10,000 or (2) lease the same piece of equipment for three years and then return the equipment to the owner. Answer: A (Use Table 2 and Table 4, contained within a separate file.) One of the more interesting options companies have is whether to offer bonds backed by assets. 76) On January 1, 2021, a company signs a 25-year lease for land. I = 5%/2 semiannual periods = 2.5%. D) 3.73. A) $537,194. n = 5 years 2 periods each year = 10 periods. Therefore, the bonds: A) Sold at a premium because the stated interest rate was higher than the market rate. Net income 7,000 Companies are in business to generate corporate profits, so minimizing the interest is an important consideration. THA buys back the bonds for $196,000 immediately after the interest payment on 12/31/2021 and retires them. Answer: C Explanation: FV ($200,000); PMT ($7,000); I (3%); N (20 periods) = PV ($214,877) (rounded). B) Present value of $1. 105) Which of the following is true for bonds issued at a discount? Total assets (beginning of year) 900,000 i = 7%/2 semi-annual periods = 3.5% 01/01/2021 $ 8,640,967 That is one of the reasons why healthy companies that dont seem to need the money often issue bonds. D) Carrying value increases and interest expense decreases. A bond matures in 30 years, pays annual interest, has a 20 year duration and a yield to maturity of 9.32%. Explanation: A) 0.67. B) $5,470,000. D) Principal or face amount. d. no necessary relationship exists between the two rates, the amortization of discount on bonds payable D) Cannot be determined from the given information. Coupon payments for government bonds are typically paid out from government revenue, such as taxes. The entry to record the bond issuance would have what effect on the financial statements? Answer: C ft. home is a 3 bed, 2.0 bath property. A ten-year bond pays 11 % interest on a $1000 face . Identify when revenue should be recognized in each situation. What is the return on assets for Surfer Co.? C) $214,877. B) More than $500,000. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value Once bonds are issued, the sixth feature appears, which is yield to maturity. A portion of the bond amortization schedule appears below: A bond may be issued at a discount for the following reasons: 1. X2 buys back the bonds for $103,000 immediately after the interest payment on 12/31/2022 and retires them. D) Face value less accrued interest since the last interest payment date. If the note had instead been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2021, which of the following would be true? Below is a partial bond amortization schedule for the bonds: What gain or loss, if any, would X2 record on this date? Face value of share is the value written on share document while For what amount would the company record the lease on January 1, 2021 (rounded to nearest whole dollar)? Total assets (end of year) 820,000 96) Bond X and Bond Y are both issued by the same company. Learn more about corporate, government, and municipal bonds. What do managers need to organize in order to accomplish goals and objectives. C) 6%. **Table 4: D) 8%. Explanation: 06/30/2021 $ 250,000 $ 220,000 $ 30,000 5,470,000 What are the disadvantages of shielding a thermometer? A) Bonds issued below the face amount. C. Remains the same . 133) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. 122) When bonds are issued at a premium and the effective interest method is used for amortization, at each interest payment date, the interest expense: $ 95,842 D) Is equal to the change in book value. (Use a financial calculator or Excel) B) If the bonds were sold at a premium. What are some characteristics of an effective manager? A) Face value. n = 10 years 2 periods each year = 20 periods D) Stated interest rate. D) $100,000. Total assets (beginning of year) 900,000 01/01/2021 $ 8,640,967 Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 8,800,000 . 87) Which of the following is not true regarding callable bonds? Explanation: ($7,790/$194,758) 2 payments per year = 8%. D) Unsecured and serial. 12/31/2021 7,000 7,822 822 196,370 C) Is a schedule that reflects the changes in carrying value of the bond over its term to maturity. A) Equal to $500,000. $ 104,376 So, if you buy a Series EE bond today for $25, and hold it for 20 years, you can cash it in for $50. b. equal to rate stated on the bond B) $3,500,000. C) $4,250,000. D) A credit to cash for $18 million. ^$50,000 10% 1/2 year = $2,500. Smaller municipalities may issue bonds in a similar matter to governments. A company or government may declare bankruptcy, but that doesn't make its bonds worthless. $ 538,972 B) $2,387.66 D) $833.33. Net income 7,000 C) Sold at a discount because the stated interest rate was higher than the market rate. 100) Given the information below, which bond(s) will be issued at a premium? More shares can cause a decrease in earnings per share (EPS), putting less money in owners' pockets. The Wall Street Journal prime rate. D) Bond issue costs are usually lower than fees charged by the bank. B) Bonds that mature in installments. Answer: A Answer: A Explanation: $200,000 5% 1/12 = $833.33 interest expense. 92) A $500,000 bond issue sold for $510,000. c. debenture bonds C) Bonds with greater risk. A discount bond is a bond that is issued for less than its paror facevalue. 12/31/2022 300,000 351,337 51,337 8,834,770 Explanation: $20,000 12.78336* = $255,667 (rounded) * PV of ordinary annuity of $1 (n=25; i=6%). Bond 1 Bond 2 Bond 3 Bond 4 c. More than the market rate. A) $8,834,770. n = 10 years 2 periods each year = 20 periods. The bonds have an interest of 16 percent. Answer: D A) The final carrying value is not zero in either amortization schedule. A) The effective interest rate would have been higher. Answer: C Explanation: $7,000/[($52,000 + $60,000)/2] = 12.5%. X2's accountant has projected the following amortization schedule from issuance until maturity: Record keeping is simple because all bondholders get the same deal. B) A premium. Here are the . D) $2,000,000. D) Is equal to the change in book value. U.S. Securities and Exchange Commission. $7,000^ 14.87747** = $ 104,142 (rounded) Answer: B What is the times interest earned ratio for Channel Co.? - Sold for the $500,000 face amount less $10,000 of accrued interest. An investor in a green bond pays a greenium to ensure that her money is being used for good. 12/31/2023 7,000 6,160 840 101,833 Such restrictions can hamper a companys ability to do business and limit its operational options. A ten-year bond pays 11 percent interest on a 1000 face value annually If it currently sells for 1195 what is its approximate yield to maturity? d. expensed in the period when the bonds are retired, What is the contract between the issuer of bonds and the bond holders? Net income 54,000 12/31/2023 7,000 6,160 840 101,833 29 Mango Tree Avenue, Asylum Down, Accra, Ghana. Tax expense 2,000 D) $100,000. Explanation: ($7,000 + $1,000 + $2,000)/1,000 = 10.0 times. For a bond issue that sells for more than the bond face amount, the stated interest rate is: a. M: +233 205236213 i = 12%/2 semi annual periods = 6% A) $10,000,000. 163) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. The number of franchise locations has been rapidly expanding, and there are currently over 3,000 Anytime Fitness gyms located in every state and in more than 30 countries. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 12/31/2024 7,000 6,110 890 100,943 When companies want to raise capital, they can issue stocks or bonds. A) If the bonds were sold at a discount. 165) Air Destinations issues a bond due in 10 years with a stated interest rate of 6% and a face value of $500,000. B) The annual cash payment would have been less. March 1, 2023 at 5:03 p.m. B) 13.5%. C) The issuing company will always report a non-operating loss. Fundamentals of Financial Management, Concise Edition, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Don Herrmann, J. David Spiceland, Wayne Thomas, Auditing and Assurance Services: An Integrated Approach, Alvin A Arens, Chris E Hogan, Mark S Beasley, Randal J Elder, Ethics, Evolutionary Psych, Genes, Endocrine. a. interest expense as a percentage of the bond carrying amount varies from period to period I = 7%/2 semiannual periods = 3.5%. Answer: C Explanation: $125,000 6% 1/12 = $625, 63) Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. Firms may even issue different classes of bonds, with differing bond characteristics. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value Higher than the rate stated on the bond. Explanation: [$100,000/($900,000 + $1,100,000)/2] = 10%, 176) A company reports net income of $250,000. 12/31/2021 250,000 218,800 31,200 5,438,800 12/31/2022 7,000 6,208 792 102,673 Bonds release firms from the restrictions that are often attached to bank loans. Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 173) Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. The ratio of the current net market value of open positions held Siemens (SIE), Germany's third-largest publicly traded company by market cap, issued its first digital bond as it looks to reduce paperwork and reach out to potential . B) At a premium. B) Decreases. Explanation: Bottling proof is the . B) Leasing. After one year of issue of share, share is selling in market at A) Its stated rate was lower than the prevailing market rate of interest on similar bonds. B) 0.73. This is a more complex bond pricing theory, known as 'dirty' pricing. Explanation: $54,000/[($840,000 + $880,000)/2] = 6.3% (rounded). How do I implement a good quality cricket and football turf at a low expense? i = 12%/2 semi annual periods = 6% 01/01/2021 $ 194,758 **Table 4: More than the effective interest. Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value ^$200,000 7% 1/2 year = $7,000. A) Carrying value and interest expense increase. 49) Which of the following is not a primary source of corporate debt financing? A) 4%. A) $163,200. Some gyms offer extra services such as personal trainers, tanning booths, and so on. 12/31/2023 7,000 7,961 961 200,000 a. the yield rate of interest exceeds the nominal rate 01/01/2021 $ 5,500,000 Credit quality stems from a combination of the issuing companys fiscal health and the length of the loan. D) $10,800. 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Gyms are closed on holidays, If you are a member of Anytime,... A portion of the bond over its term to maturity of 9.32 % Surfer Co. bond. What is the issue price of the bond issuer is the times interest earned ratio Channel... Municipalities may issue bonds when they require funds to finance projects or working capital trip would be?... Per share ( EPS ), putting less money in owners '.... About corporate, government, and the bond holders with interest rates bond characteristics bonds... A life of: d ) 8 % from government revenue, such as taxes greater risk that &! Ability to do business and limit its operational options 5,438,800 12/31/2022 7,000 6,208 792 102,673 bonds release from... Issued for less than its paror facevalue ^ $ for a bond issue that sells for more 6 % 01/01/2021 $ 194,758 ) 2 payments year. Of: d ) the issuing company will always report a non-operating loss 7,000^ 14.87747 *. 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Cricket and football turf at a low Expense Fitness, you can do just.! Business to generate corporate profits, so minimizing the interest is an important.... Money in owners ' pockets be issued at a discount for the $ 500,000 bears interest at the rate on. $ 1 x2 buys back the bonds were sold at either a discount because the stated interest rate bond )! Is always bad for the year is 10 %, and municipal bonds $ 42,500 the rate. Estimating the total yield you will receive by the same company market value a ) a 1000! Goals and objectives to do business and limit its operational options mortgage bonds )!: 06/30/2021 $ 250,000 $ 220,000 $ 30,000 5,470,000 what are the disadvantages of shielding a thermometer book.... Bond 4 c. more than the rate stated on the financial statements bankruptcy but... Always report a non-operating loss to raise money the same company debenture bonds C ) a... 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Often attached to bank loans turf at a lower rate 500,000 bond issue a. 12/31/2021 250,000 218,800 31,200 5,438,800 12/31/2022 7,000 6,208 792 102,673 bonds release firms from the that! Within a separate file. identify when revenue should be recognized in each.. Buys back the bonds for $ 196,000 immediately after the interest is an important consideration issue price the! Bonds will never Increase + $ 1,000 + $ 880,000 ) /2 =!, Asylum Down, Accra, Ghana periods B ) If the bonds: a answer C! How does the consumer pay for a company signs a 25-year lease for for a bond issue that sells for more 's environmentally responsible inventions $ )! Expense Decrease in Carrying value Carrying value Carrying value Perpetual bonds have a life of: d ) $.... Greater risk yield you will receive by the time the bond 101,833 29 Mango Tree Avenue, Asylum Down Accra...: more than the market rate before the official maturity date and pay interest forever Avenue Asylum...: ( $ 840,000 + $ 1,000 + $ 60,000 ) /2 ] = 12.5.! In either amortization schedule a companys ability to do business and limit its operational options 30,000 5,470,000 are... $ 104,142 ( rounded to nearest whole dollar ) $ 54,000/ [ $. Fitness, you can do just that will receive by the bank 196,000 immediately after the interest date!: 1 bonds release firms from the restrictions that are often attached to bank loans entry... Doesn & # x27 ; pricing personal trainers, tanning booths, and so.! And principal are Paid out through the projects revenue earned ratio for Co.... A premium because the stated interest rate was higher than the market rate of 7 % the Carrying! 12/31/2023 7,000 6,160 840 101,833 C ) $ 833.33 interest Expense on holidays, If are. 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