Accounting
for Bonds Sold at a Discount
The Biltmore National Bank raised capital through the sale of $100 million face
value of 8% coupon rate, 10-year bonds.The bonds paid
interest semiannually and were sold at a time when equivalent risk-rated bonds carried
a yield rate of 10%.
1. Calculate the proceeds that The
Biltmore National Bank received from the sale of the 8% bonds.
Use Excel or a financial calculator for your computations. Round your
answers to the nearest dollar.
2. How will the bonds be disclosed on Biltmores balance sheet immediately
following the sale?
Round your answers to the nearest dollar.
Balance
sheet disclosure (following sale):

Bonds
payable

$Answer

Less:
Bonds discount (enter as negative)

$Answer

Bonds
payable(net)

$Answer

3. Calculate the interest expense on the bonds for the first year that the
bonds are outstanding.
Do not round until final answer. Round answers to the nearest dollar.
1.
First six months:

2. Second six months:

4. Calculate the book
value of the bonds at the end of the first year.
Do not round until final answer. Round answer to the nearest dollar.

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ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar

1.
$
2.
Bonds Payable:
3.
Plus: Bond Premium:
4.
Book Value:
5.
First Six Months:
6.
Second Six Months:
7.
Book Value (end of first year):

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ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar

1.
Calculate gain or loss:
2.
Keep Financing Y/N

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ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar

1.
Proceeds Received:
2.
Interest Expense:
a.
Year1:
b.
Year2:
3.
Amount of Cash Needed:
4.
Amount of the Gain or Loss:

INFO:

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1.
%
2.
%
3.
%
4.
%
5.
$ Million

Current Assets

Noncurrent Assets

Total Assets

Current Liabilities

Long-term debt

Other noncurrent liabilities

Shareholders Equity

Total

Accounting
for Bonds Sold at a Discount
The Biltmore National Bank raised capital through the sale of $100 million face
value of 8% coupon rate, 10-year bonds.The bonds paid
interest semiannually and were sold at a time when equivalent risk-rated bonds carried
a yield rate of 10%.1. Calculate the proceeds that The
Biltmore National Bank received from the sale of the 8% bonds.
Use Excel or a financial calculator for your computations. Round your
answers to the nearest dollar.
2. How will the bonds be disclosed on Biltmores balance sheet immediately
following the sale?
Round your answers to the nearest dollar.Balance
sheet disclosure (following sale):Bonds
payable$AnswerLess:
Bonds discount (enter as negative)$AnswerBonds
payable(net)$Answer
3. Calculate the interest expense on the bonds for the first year that the
bonds are outstanding.
Do not round until final answer. Round answers to the nearest dollar.1.
First six months:2. Second six months:
4. Calculate the book
value of the bonds at the end of the first year.
Do not round until final answer. Round answer to the nearest dollar..png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.33.12 pm.png”>ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar1.
$2.
Bonds Payable:3.
Plus: Bond Premium:4.
Book Value:5.
First Six Months:6.
Second Six Months:7.
Book Value (end of first year):.png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.36.50 pm.png”>ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar1.
Calculate gain or loss:2.
Keep Financing Y/N.png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.34.00 pm.png”>ANSWER: Do Not Round Until Final Answer. Round to Nearest
Dollar1.
Proceeds Received:2.
Interest Expense:a.
Year1:b.
Year2:3.
Amount of Cash Needed:4.
Amount of the Gain or Loss:INFO:.png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.40.12 pm.png”>.png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.40.41 pm.png”>.png” alt=”Macintosh hd:users:sarahtivnan:desktop:screen shot 2015-10-24 at 5.40.31 pm.png”>1.
%2.
%3.
%4.
%5.
$ MillionCurrent AssetsNoncurrent AssetsTotal AssetsCurrent LiabilitiesLong-term debtOther noncurrent liabilitiesShareholders EquityTotal