On February 28, 2014, Panorama Ltd. issues 7%, 10-year notes with a face value of $300,000. The
Question:
On February 28, 2014, Panorama Ltd. issues 7%, 10-year notes with a face value of $300,000. The notes pay interest on February 28 and August 31, and Panorama amortizes notes by the straight-line method.
Requirements
1. If the market interest rate is 6% when Panorama issues its notes, will the notes be priced at face value, a premium, or a discount? Explain.
2. If the market interest rate is 8% when Panorama issues its notes, will the notes be priced at face value, a premium, or a discount? Explain.
3. Assume that the issue price of the notes is 96. Journalize the following note payable transactions:
a. Issuance of the notes on February 28, 2014
b. Payment of interest and amortization of the bonds on August 31, 2014
c. Accrual of interest and amortization of the bonds on December 31, 2014
d. Payment of interest and amortization of the bonds on February 28, 2015
4. Report interest payable and notes payable as they would appear on Panorama's balance sheet at December 31, 2014.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
Req 1 The 7 notes issued when the market interest rate is 6 will be priced at a premium They are rel...View the full answer
Financial Accounting
ISBN: 978-0133472264
5th Canadian edition
Authors: Charles Horngren, William Thomas, Walter Harrison, Greg Berberich, Catherine Seguin
