Nilani company purchased 100 arapaho company bonds on april

Reference no: EM13611807

Nilani Company purchased 100 Arapaho Company bonds on April 1,2007. The bonds pay interest semiannually on March 31 and September 30 at an annualcoupon rate of 9%. The bonds sold at an effective yield of 8%. The effect of brokeragefees is included in computing the effective yield. The bonds mature on March 31, 2009, at theirface value of $1,000 per bond. Nilani's fiscal year ends on September 30.

Required

A. Compute the price Nilani paid for Arapaho's bonds.(Hint: Determine the present value of the interest payments and principal repayment as demonstratedin Chapter 8.)

B. Prepare an amortization schedule for Nilani'sinvestment.

C. Assume that the bonds are classified as held-to-maturitysecurities. Use the format presented in this chapter to show how the bond transactions would beentered into Nilani's accounting system in 2007, 2008, and 2009.

D. What is the total interest revenue from these bonds thatNilani will report on its 2007, 2008, and 2009 income statements? How does total interest revenuecompare to Nilani's net cash flow from this bond investment during those same three years?Show your computations.

E. What does the result in part D suggest to you regarding thesimilarities and differences between accrual and cash-based measures?

Reference no: EM13611807

Questions Cloud

An advocacy group is investigating whether gender has an : an advocacy group is investigating whether gender has an effect on job category in large investment firms. given the

Marc price co uses the gross profit method to : marc price co. uses the gross profit method to estimateinventory for monthly reporting purposes. presented below

Problem 102 kingston inc management is considering : problem 10.2 kingston inc. management is considering purchasing a new machine at a cost of 3983214. they expect this

A 4 kg box is pushed up a frictionless 30 degree incline : a 4 kg box is pushed up a frictionless 30 degree incline with a force of 40n. this 40 n force is parallel to the

Nilani company purchased 100 arapaho company bonds on april : nilani company purchased 100 arapaho company bonds on april 12007. the bonds pay interest semiannually on march 31 and

An advocacy group is investigating whether gender has an : an advocacy group is investigating whether gender has an effect on job category in large investment firms. given the

A new operating system for an existing machine is expected : 1. a new operating system for an existing machine is expected to cost 250000 and have a useful life of four years. the

Why would a manufacturing and a retail company have : why would a manufacturing and a retail company have different accounting cycles? would you expect the steps of the

How are general long-term liabilities distinguished from : how are general long-term liabilities distinguished from other long-term liabilities for the government? how does

User Account

All Pages