Please Show Your Work Accounting for Bonds Sold at a Discount The


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Please see attached. Please show your work. Thanks Please Show Your Work.docx Please Show Your Work Accounting for Bonds Sold at a Discount The Biltmore National Bank raised capital through the sale of $100 million face value of 8% coupon rate, 10-year bonds. The bonds paid interest semiannually and were sold at a time when equivalent risk-rated bonds carried a yield rate of 10%. Calculate the proceeds that The Biltmore National Bank received from the sale of the 8% bonds. Use Excel or a financial calculator for your computations. Round your answers to the nearest dollar. How will the bonds be disclosed on Biltmore’s balance sheet immediately following the sale? Round your answers to the nearest dollar. Balance sheet disclosure (following sale): Bonds payable Less: Bonds discount (enter as negative) Bonds payable(net) Calculate the interest expense on the bonds for the first year that the bonds are outstanding. Do not round until final answer. Round answers to the nearest dollar. First six months Second six months Calculate the book value of the bonds at the end of the first year. Do not round until final answer. Round answer to the nearest dollar. $Answer Accounting for Notes Issues at a Premium The Longo Corporation issued $50 million maturity value of 8 percent coupon rate notes, with interest paid semiannually. At the time of the note issuance, equivalent risk-rated debt instruments carried a yield rate of 6 percent. The notes matured in 5 years. Calculate the proceeds that the Longo Corporation would receive from the sale of the notes. Use Excel or a financial calculator for your computations. Round your answers to the nearest dollar. How will the notes be reported on Longo’s balance sheet immediately following the sale? Round your answers to the nearest dollar. Bonds payable Plus: Bond Premium Book Value Calculate the interest expense on the notes for the first year. Do not round until final answer. Round answers to the nearest dollar. First six months Second six months Calculate the book value of the notes at the end of the first year. Do not round until final answer. Round answer to the nearest dollar. Retiring Debt Early Smith & Company issued $80 million maturity value of 5-year bonds, which carried a coupon rate of 6% and paid interest semiannually. At the time of the offering, the yield rate for equivalent risk-rated securities was 8%. Two years later, market yield rates had risen to 10%, and since the company no longer needed the debt financing, executives at Smith & Company decided to retire the debt. Calculate the gain or loss that Smith & Company will incur as a consequence of retiring the debt early. Use Excel or a financial calculator for your computations. Do not round until your final answer. Round your answer to the nearest dollar. If it is a loss, enter as a negative. Is the early retirement of the debt a good decision if Smith & Company does not need the financing? Answer Debt Retirement MTF Inc. is a manufacturer of electronic components for facsimile equipment. The company financed the expansion of its production facilities by issuing $100 million of 10-year bonds carrying a coupon rate of 8% with interest payable annually on December 31. The bonds had been issued on January 1. At the time of the issuance, the market rate of interest on similar risk-rated instruments was 6%. Two years later, the market rate of interest on comparable debt instruments had climbed to 12%. The CEO of MTF realized that this might be an opportune time to repurchase the bonds, particularly because an unexpected surplus of cash made the outstanding debt no longer necessary. Required 1. Calculate the proceeds received by the company when the debt was initially sold. Use Excel or a financial calculator for your computations. Round your answer to the nearest dollar. 2. Calculate the interest expense for each of the two years that the bonds were outstanding. Do not round until

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