Bonds

Question 1

In the cash Flow statement what to add and backout

Answer 1

Add back the discount and back out the premium

Question 2

How to figure out the proceeds of the bond

Answer 2

Face Value at lumpsum plus interest at pv at ordinary annuity

Question 3

whatis the cash amount

Answer 3

Stated rate

Question 4

Effective interest method

Answer 4

Face+/- premium or discount=C.Veffective interest rate=Interest expense/interesticome-Cash payment(fACEStated Rate*TIme)= Amortization of Discount or premium

Question 5

Convertible Bonds

Answer 5

Those are like one security

Question 6

Always use present value of one for ten periods and present value of ordinary annuity of one for ten periods

Answer 6

present value one for face value of the bonds, present value of interest for ten periods

Question 7

BIC to be amortized

Answer 7

Debt issue costs include (1) printing costs, (2) underwriters’ commissions, (3) attorney’s fees, and (4) promotion costs (including preparation of a prospectus). The issue costs to be amortized equal $245,000 ($20,000 promotion costs + $25,000 printing costs + $200,000 underwriters’ commissions). Debt issue costs are presented as a direct deduction from the related debt liability.

Question 8

Convertible bonds

Answer 8

Convertible bonds give the stockholder the option of converting the bonds so the convertibility don’t have the value. Two methods book value and Market value method. The difference is book value method is book value of the bonds and the market value is market value of the stock.

Question 9

unamortized bond discount

Answer 9

unamortized bond discount is the amount effective interest rate - staed interest rate. the balance amount is reduced from the bond discount amount