Reference no: EM132696980

Questions -

Q1. Determining the present value of bonds payable Interest rates determine the present value of future amounts. (Round to the nearest dollar.)

Requirements -

1. Determine the present value of 10-year bonds payable with face value of $86,000 and stated interest rate of 14%, paid semiannually. The market rate of interest is 14% at issuance.

2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.

3. Same bonds payable as in Requirement 1, but the market interest rate is 12%

Q2. Answer the following questions about Danny's bonds payable:

a. What is the maturity value of the bonds?

b. What is the carrying amount of the bonds at December 31, 2020?

c. What is the semiannual cash interest payment on the bonds?

d. How much interest expense should the company record each year?

Q3. 1. If the market interest rate is 5% when DCU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.

2. If the market interest rate is 8% when DCU issues its bonds, will the bonds be priced at face value, at a premium, or at a discount? Explain.

3. The issue price of the bonds is 93. Journalize the following bond transactions:

a. Issuance of the bonds on January 1, 2018.

b. Payment of interest and amortization on June 30, 2018.

c. Payment of interest and amortization on December 31, 2018.

d. Retirement of the bond at maturity on December 31, 2037.

Q4. 1. Report these liabilities on the Compass Wireless balance sheet, including headings and totals for current liabilities and long-term liabilities.

2. Compute Compass Wireless's debt to equity ratio at December 31, 2018.