Accounting Help-Time Value of Money..NEED ASAP!!

May 5th, 2015
Business Finance
Price: $35 USD

Question description

Question 1:  

Johns Co. is issuing $7.5 million 12% bonds in a private placement on July 1, 2014. Each $1,000 bond pays interest semi-annually on December 31 and June 30 of each year. The bonds mature in ten years. At the time of issuance, the market interest rate for similar types of bonds was 8%.

a.   What is the expected selling price of the bonds?

b. Prepare the journal entry that Johns Co. will make when the bonds are issued.

c. The bond indenture agreement requires that Johns Co. deposit money in a bond sinking fund semi annually beginning on the first interest payment date.  The controller estimates that the annual rate of interest earned on the investments in the sinking fund will be 8%.  What amount must be deposited annually in order to have enough money in the fund to pay off the bonds in 10 years?

d. Prepare an amortization schedule to prove that your answer in d is correct. Cut and paste the schedule below. PLACE YOUR AMORTIZATION SCHEDULE AT THE END OF THE QUIZ.

e. Prepare the entry that will be made each year to record the payment to the sinking fund.

Question 2:

On 1/1/14, Bet Company sold goods costing $120,000 to C Company. C company signed a non-interest bearing note requiring payment of $40,000 annually for 8 years. The first payment was made on 1/1/14. The   prevailing rate of interest for this type of note at the date of issuance was 8%. Prepare the entry to record the transaction on both Bet and C's books. Bet uses a perpetual inventory system.

Question 3:

How much must be invested on 1/1/13 to receive $20,000 for ten years if the first payment is to be taken on January 1st, 2024? Assume an annual interest rate of 6%?

-Prepare a quick amortization schedule to prove that your answer is correct.

Tutor Answer

(Top Tutor) David M.
School: University of Virginia

Studypool has helped 1,244,100 students

Review from student
" Outstanding Job!!!! "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1823 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors