154.
Stealth Fitness Center issues 7%, 15-year bonds with a face amount of $200,000. The
market interest rate for bonds of similar risk and maturity is 6%. Interest is paid
semiannually. At what price will the bonds be issued?
155.
On January 1, 2018, Water Wonderland issues $20 million of 8% bonds, due in ten years,
with interest payable semiannually on June 30 and December 31 each year.
1. If the market rate is 7%, will the bonds issue at face amount, a discount, or a premium?
Calculate the issue price.
2. If the market rate is 8%, will the bonds issue at face amount, a discount, or a premium?
Calculate the issue price.
3. If the market rate is 9%, will the bonds issue at face amount, a discount, or a premium?
Calculate the issue price.
156.
Pizza Pier issues 7%, 10-year bonds with a face amount of $80,000 on January 1, 2018.
The market interest rate for bonds of similar risk and maturity is also 7%. Interest is paid
semiannually on June 30 and December 31.
1. Record the bond issue.
2. Record the first interest payment on June 30, 2018.
157.
Pizza Pier issues 7%, 10-year bonds with a face amount of $80,000 for $74,564 on January
1, 2018. The market interest rate for bonds of similar risk and maturity is 8%. Interest is
paid semiannually on June 30 and December 31.
1. Record the bond issue.
2. Record the first interest payment on June 30, 2018.
158.
Pizza Pier issues 7%, 10-year bonds with a face amount of $80,000 for $85,951 on January
1, 2018. The market interest rate for bonds of similar risk and maturity is 6%. Interest is
paid semiannually on June 30 and December 31.
1. Record the bond issue.
2. Record the first interest payment on June 30, 2018.
159.
Presented below is a partial amortization schedule for Discount Foods:
(1) Period
(2)
Cash
Paid
(3)
Interest
Expense
(4)
Increase
in
Carrying
Value
(5)
Carrying
Value
Issue date
$74,564
1
$2,800
$2,983
$183
74,747
2
2,800
2,990
190
74,937
1. Record the bond issue assuming the face value of bonds payable is $80,000.
2. Record the first interest payment.
160.
Presented below is a partial amortization schedule for Premium Foods:
(1) Period
(2)
Cash
Paid
(3)
Interest
Expense
(4)
Decrease
in
Carrying
Value
(5)
Carrying
Value
Issue date
$85,951
1
$2,800
$2,579
$221
85,730
2
2,800
2,572
228
85,502
1. Record the bond issue assuming the face value of bonds payable is $80,000.
2. Record the first interest payment.
Bonds Payable
Interest Expense
Premium on Bonds Payable
Cash
161.
On January 1, 2018, Ripstick Park issues $800,000 of 8% bonds, due in ten years, with
interest payable semiannually on June 30 and December 31 each year. Assuming the
market interest rate on the issue date is 8%, the bonds will issue at $800,000. Record the
bond issue on January 1, 2018, and the first two semiannual interest payments on June 30,
2018, and December 31, 2018.
162.
On January 1, 2018, Ripstick Park issues $800,000 of 8% bonds, due in ten years, with
interest payable semiannually on June 30 and December 31 each year. Assuming the
market interest rate on the issue date is 9%, the bonds will issue at $747,968.
1. Complete the first three rows of an amortization table through December 31, 2018.
2. Record the bond issue on January 1, 2018, and the first two semi-annual interest
payments on June 30, 2018, and December 31, 2018.
163.
On January 1, 2018, Ripstick Park issues $800,000 of 8% bonds, due in ten years, with
interest payable semiannually on June 30 and December 31 each year. Assuming the
market interest rate on the issue date is 7%, the bonds will issue at $856,850.
1. Complete the first three rows of an amortization table through December 31, 2018.
2. Record the bond issue on January 1, 2018, and the first two semi-annual interest
payments on June 30, 2018, and December 31, 2018.
164.
Sun City issues $50 million of bonds on January 1, 2018 that pay interest semiannually on
June 30 and December 31. Portions of the bond amortization schedule appear below:
(1) Date
(2) Cash
Paid
(3)
Interest
Expense
(4)
Decrease
in
Carrying
Value
(5)
Carrying
Value
1/1/2018
$55,338,768
6/30/2018
2,000,000
1,936,857
63,143
55,275,625
12/31/2018
2,000,000
1,934,647
65,353
55,210,272
Required:
1. Were the bonds issued at face amount, a discount, or a premium?
2. What is the original issue price of the bonds?
3. What is the face amount of the bonds?
4. What is the stated annual interest rate? (Hint: Be sure to provide the annual rate rather
than the six month rate.)
5. What is the market annual interest rate? (Hint: Be sure to provide the annual rate
rather than the six month rate.)
6. What is the total cash paid for interest assuming the bonds mature in 20 years?
165.
Pizza Pier retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the
bonds have a face value of $70,000 carrying value of $74,937. Record the early retirement
of the bonds.
166.
Magic Mountain retires its 8% bonds for $127,000 before their scheduled maturity. At the
time, the bonds have a face value of 125,000 and a carrying value of $118,000. Record the
early retirement of the bonds.
167.
Western World has the following selected data ($ in millions):
Balance Sheet Data
2018
2017
Total Assets
$2,511
$2,315
Total Liabilities
1,685
1,525
Total Stockholders’
Equity
826
790
Income Statement Data
Sales
$786
Interest Expense
77
Tax Expense
32
Net Income
80
Based on these amounts, calculate the following ratios for Western World in 2018:
1. Debt to equity ratio.
2. Return on assets ratio.
3. Times interest earned ratio.
2.04
9-99
168.
Selected financial data for these two close competitors in the home building industry are
provided below:
($ in millions)
Company A
Company
B
Total assets
$40,877
$33,005
Total liabilities
21,484
13,936
Total stockholders’
equity
19,393
19,069
Sales
$66,176
$47,220
Interest expense
676
287
Tax expense
1,362
1,042
Net income
2,620
1,783
1. Calculate the debt to equity ratio for Company A and Company B. Which company has
the higher ratio?
2. Calculate the times interest earned ratio for Company A and Company B. Which
company is better able to meet interest payments as they become due?
=