The Mariner company, a calender year corporation, issued$1,000,000 of 5% bonds at a price generating a 4% yield. The bondswere dated January 1, 2006 and were issued that day. The bondsmature January 1, 2016. The bonds pay interest semi-annuallyJanuary 1 and on June 30th of each year.
1.) Compute the selling price of ONLY the bonds (face amountexcluding interest).
2.) What is the TOTAL amount of cash collected on the sale ofthe bonds on January 1, 2006?
3.) What is the amount of interest expense on the bonds for 2006under the straight line method of amortizing any premiums ordiscount on the bond sale?
4.) What will be the interest expense on the bonds over theentire life of the bonds? Use excel and develop a spreadsheet usingthe straight line method and a spreadsheet using the effectiveinterest rate method for the entire life of the bonds. Eachspreadsheet should list the following: Date, Beginning carryingvalue, interest expense, cash paid, premium or discount amortized,ending carrying value.
5.) What is the gain or loss on the retirement of the bonds,assuming the bonds are redeemed at 102 plus accrued interest atJune 1, 2010. Any premiums of discount is amortized under thestraight line method.
The Mariner company, a calender year corporation, issued$1,000,000 of 5% bonds at a price generating a 4% yield. The bondswere dated January 1, 2006 and were issued that day. The bondsmature January 1, 2016. The bonds pay interest semi-annuallyJanuary 1 and on June 30th of each year.
1.) Compute the selling price of ONLY the bonds (face amountexcluding interest).
2.) What is the TOTAL amount of cash collected on the sale ofthe bonds on January 1, 2006?
3.) What is the amount of interest expense on the bonds for 2006under the straight line method of amortizing any premiums ordiscount on the bond sale?
4.) What will be the interest expense on the bonds over theentire life of the bonds? Use excel and develop a spreadsheet usingthe straight line method and a spreadsheet using the effectiveinterest rate method for the entire life of the bonds. Eachspreadsheet should list the following: Date, Beginning carryingvalue, interest expense, cash paid, premium or discount amortized,ending carrying value.
5.) What is the gain or loss on the retirement of the bonds,assuming the bonds are redeemed at 102 plus accrued interest atJune 1, 2010. Any premiums of discount is amortized under thestraight line method.
