Present Value of Amounts Due Assume that you are going to receive $300,000 in 10 years. The current market rate of interest is 12% a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar b. Why is the present value less than the $300,000 to be recelved in the future? The present value is less due to the compounding of interest over the 10 years. Present Value of an Annulty Determine the present value of $320,000 to be received at the end of each of four years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar, c. Why is the present value of the four $320,000 cash receipts less than the $1,280,000 to be received in the future? The present value is less due to the compounding of interest over the 4 years Feedback Check My Work Review the time value of money concept. Recall that the time value of money concept recognizes that cash received today is worth more than the same amount of cash to be received in the future eBook Print Item Present Value of an Annuity On January 1, you win $5,000,000 in the state lottery. The $5,000,000 prize will be paid in equat installments of $500,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 7%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar Present Value of an Annuity On January 1, you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 12%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar. Will the present value of your winnings using an interest rate of 12% be more than the present value of your winnings using an Interest rate of 5%? NO Feedback Check My Work Review the time value of money concept. Recall that the time value of money concept recognizes that cash received today is worth more than the same amount of cash to be received in the future. Present Value of Bonds Payable; Discount Pinder Co, produces and sells high-quality video equipment. To finance its operations, Pinder issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%, Determine the present value of the bonds payable, using the present value tables In Exhibit 5 and Exhibit 7. Round to the nearest dollar Present Value of Bonds Payable; Premium Moss Co, issued $300,000 of five-year, 13% bonds, with interest payable semiannually, at a market (effective) interest rate of 12% Determine the present value of the bonds payable, using the present value tables in Exhibit 5 and Exhibit 7. Round to the nearest dollar Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $28,000,000 of five-year, 6% bonds to finance its operations of producing and Selling home Improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $25,728,836. a. Journalize the entries to record the following: 1. Issuance of the bonds 2. First semiannual interest payment. The bond discount is combined with the semiannual Interest payment (Round your answer to the nearest dollar) 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank. 1. Cash Discount on Bonds Payable Bonds Payable 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Il 11 Post CengageNOWV21 Online teaching and learning resource from Cengage Learning DESCURCANCER Bonds Payable 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. Determine the amount of the bond interest expense for the first year. c. Why was the company able to issue the bonds for only $25,728,836 rather than for the face amount of $28,000,000? The market rate of interest is greater than the contract rate of interest. Therefore, inventors are not willing to pay the full face amount of the bonds. Previous Next > An $800,000 bond issue on which there is an unamortized premium of $57,000 is redeemed for $785,000 Journalize the redemption of the bonds. Refer to the Chart of Accounts for exact wording of account titles. Instructions Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) Interest rate of 8%, recelving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1. Required: a. Joumalize the entries to record the following. Refer to the Chart of Accounts for exact wording of account titles 1. Issuance of bonds on April 1, 20Y1 2. First interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar) b. Explain why the company was able to issue the bonds for $20,811,010 rather than for the face amount of $20,000,000