1. Determining Bond PriceOn January 1, 2020, Arrow Inc. issued $200,000, 5% bonds due in 10 years. The bonds pay annual interest at the end of each year equal to 5% of face value. Thecurrent market interest rate for bonds with similar risk is 6%. Determine the selling price of the bonds• Round answer to the nearest whole dollar.• Do not use a negative sign with your answer.

The selling price of the bonds is the present value of the cash payments to be made during the life…

Answered: Determine the selling price of the…

Business

Accounting

Determine the selling price of the bonds

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EB: Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual...

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Determining Bond Price
On January 1, 2020, Arrow Inc. issued $200,000, 5% bonds due in 10 years. The bonds pay annual interest at the end of each year equal to 5% of face value. The
current market interest rate for bonds with similar risk is 6%. Determine the selling price of the bonds
• Round answer to the nearest whole dollar.
• Do not use a negative sign with your answer.

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