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6% Bonds. On July 1, 2007, Clarence issued 800 bon...




6% Bonds. On July 1, 2007, Clarence issued 800 bonds. The bonds are 6% stated (face, coupon) rate, 10-year, non-convertible, callable bonds (each bond has a face value of $1,000 and they were issued at 107.7214). The bonds pay interest annually on July 1. The bond issue price was based on an effective interest rate of 5%. The bonds are callable anytime at 96 plus accrued interest. 1. HW4 - 8 points This question refers to the bonds that have a stated interest rate of 6%. a. What is total interest expense on these bonds for fiscal 2008 (year ended 12/31/08)? b. What is the carrying value of these bonds as of 12/31/08? For parts c and d, assume that the bonds are retired on December 31, 2009. c. How much gain or loss will Clarence recognize on the retirement? Please provide a dollar amount and state whether it is a gain or loss. d. How much cash will Clarence have to pay the bondholders on that date? If there is more than one item that affects cash flows, list each separately and, for each, provide a dollar amount. If the amounts are not zero, for each, indicate whether it is a cash inflow or outflow and whether it would appear as an operating, investing, or financing activity in the cash flow statement.


Paper#8801 | Written in 18-Jul-2015

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