Sprint Is Planning to Issue Debentures with a Face Value

question 47

Essay

Sprint is planning to issue debentures with a face value of $10,000,000 on September 1,2010.The debentures mature in 10 years and have a face interest rate of 8 percent that is paid semiannually on March 1 and September 1 of each year.Sprint thinks the market interest rate will be 6%.Assume that Sprint has a fiscal year end on Aug 31.
Required:
(A.)Calculate the proceeds of the bond and set up an amortization schedule for the first year of the bond's life.
(B.)Where will the proceeds of the bond be reported on the budgeted financial statements.
(C.)What is the amount of interest expense Sprint will incur in the first year of the bond's life and where will the interest be reported on the budgeted financial statements for August 31,2011.
(D.)How will the bond be reported on the budgeted balance sheet on August 31,2011.

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Definitions:

Rpm

Revolutions per minute, a unit of rotational speed that specifies the number of turns completed by an object around an axis in one minute.

Shift Limit

The maximum or minimum point to which a variable, such as gear, speed, or position, can be adjusted or altered in a system.

Shift Rail Bar

A component in manual transmissions that moves the gears into place when the driver changes gear.

Standard Transmission

A type of vehicle transmission that requires manual operation by the driver to select and engage gears, typically using a clutch and a gear lever.