5 On July 1 2015 Andrew Inc issued 20year bonds payable with

5. On July 1, 2015, Andrew Inc. issued 20-year bonds payable with a face value of $600,000 and a face inte issued to yield a market interest rate of 12 percent. Interest is payable rest rate of 10 percent. The bonds were In calculating the present value of the bond issue of te the present value of the face amount and percent rate will be used to calculate the present value of the face amount and au a zon ty 1. In caleulating the present value of the bond Isue of July 1, 2015, the a. 12 percent rate will be used to calcula the present value of the periodic interest payments. b. 10 the 12 payments c. 10 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments d. 12 percent rate will be used to calculate the present value of the face amount and the 10 percent rate will be used to calculate the present value of the periodic interest payments. percent rate will be used to calculate the present value of the periodic interest 6. A bondholder that owns a $1,000, 10%, 10-yearbond has: A. Ownership rights in the issuing company. B. The right to receive $10 per year until maturity. C. The right to receive $10,000 at maturity D. The right to receive $1,000 at maturity. E. The right to receive dividends of $1,000 per year.

Solution

Ans 5 a) 12% will be used to calculate the present value of the face amt and the present value of the periodic interest payment As price of the bonds=Present value of face value=PV of interest payment and market rate is used for calculation pf PV ans 6 D) the right to receive $1000 at maturity As the bondholder who has $1000 valye bonds will get $1000 bonds at maturity ans 8 E) Contra liability Discount on bonds payable is contra liability accounta s it decreases the bonds payable amt ans 9 255933*6.5%*6/12 8318 Option A $8125 If any doubt please comemnt. If satisfied you can rate