Zookal
Zookal

We’d love to hear any feedback or comment from you!

© 2011-2021 Zookal Pty Ltd

View question and answer

From our collection of questions and answers
Business · Accounting
Question details

On January 1, 2014, Aumont Company sold 12% bonds having a maturity value of $500,000. The market determined that 10% was the appropriate rate of interest, given the risks that Aumont Company presents to bondholders. The bonds are dated January 1, 2014, mature January 1, 2019, and pay interest on December 31 of each year.

  1. Determine the amount that bondholders will pay Aumont for these bonds when the bonds are issued on January 1, 2014.

Present value of the maturity value =

500,000 x [PVSS, n = 5, i = 10%] =

500,000 x .62092 = 310,460

Present value of interest payments =

(500,000 x .12) x [PVOA factor, n = 5, i = 10%] =

60,000 x 3.79079 = 227,447

Price of the bond = total present value of the future cash flows = 310,460 + 227,447 = $537,907

  1. Complete the following amortization table for the first two interest payments.

Date

Cash Interest

Effective Interest

Premium Amortization

Carrying Amount

1/1/14

537,907

12/31/14

12/31/15

  1. Complete the following financial statements for 2014.

Aumont Company

Statement of Cash Flows

For the Year Ended December 31, 2014

Operating Activities:

     Interest Payments

Financing Activities:

    Cash proceeds from issuing bonds

Aumont Company

Income Statement

For the Year Ended December 31, 2014

Other expenses:

     Interest Expense

Aumont Company

Balance Sheet

December 31, 2014

Assets:

Liabilities:

     Cash

   Bonds Payable

   Premium

Equities:

   

   Retained Earnings

  1. Complete the following financial statements for 2015.

Aumont Company

Statement of Cash Flows

For the Year Ended December 31, 2015

Operating Activities:

     Interest Payments

Aumont Company

Income Statement

For the Year Ended December 31, 2015

Other expenses:

   Interest Expense

Aumont Company

Balance Sheet

December 31, 2015

Assets:

Liabilities:

     Cash

   Bonds Payable

   Premium

Equities:

   

   Retained Earnings

Answer
Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.

Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.Find step-by-step answers from expert tutors to questions asked by students like you. Start 14-day free trial.