What is the impact of the amortization of a bond premiumor a bond discount on the financial statements of the issuingcompany?
What is the impact of the amortization of a bond premiumor a bond discount on the financial statements of the issuingcompany?
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BANK NOVA SCOTIA | As of 1-Jun-2015 |
OVERVIEW
Price: | 102.51 |
Coupon (%): | 2.125 |
Maturity Date: | 11-Sep-2019 |
Yield to Maturity (%): | 1.576 |
Current Yield (%): | 2.073 |
Fitch Ratings: | AAA |
Coupon Payment Frequency: | Semi-Annual |
First Coupon Date: | 11-Mar-2015 |
Type: | Corporate |
Callable: | No |
OFFERINGINFORMATION
Quantity Available: | 500 |
Minimum Trade Qty: | 10 |
Dated Date: | 11-Sep-2014 |
Settlement Date: | 4-Dec-2014 |
Assume interest rates for bonds today is 5% for an AAA ratedbond. Calculate the price of the bond you have selected relative tothe 5%.
Is the bond selling at a premiumor a discount? Why?
Be sure to show how you arrived at your answer.
PV0 = (coupon) (1- [1 / (1 + r) m]) + par value
R(1+r) m
Bonds Payable Journal Entries; Effective Interest Amortization
On December 31, 2009, Blair Company issued $800,000 of 20-year, 11% bonds payable for $754,784, yielding an effective interest rate of 12%. Interest is payable semiannually on June 30 and December 31. Prepare journal entries to reflect (a) the issuance of the bonds, (b) the semiannual interest payment and discount amortization (effective interest method) on June 30, 2010, and (c) the semiannual interest payment and discount amortization on December 31, 2010. Round amounts to the nearest dollar.
General Journal | |||
---|---|---|---|
Date | Description | Debit | Credit |
a.) | |||
Dec.31 | Cash | $Answer | $Answer |
Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
To record issuance of bonds. | |||
b. | |||
Jun.30 | Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense. | Answer | Answer |
Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense. | Answer | Answer | |
Cash | Answer | Answer | |
To record semiannual interest payment and | |||
c.) | |||
Dec.31 | Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer |
Answer: Cash, Discount on Bonds Payable, Bonds Payable, Bond Interest Expense | Answer | Answer | |
Cash | Answer | Answer | |
To record semiannual interest payment. | |