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Problem 10-2B (Concluded)
Part 3
Twenty payments of $170,000...................$3,400,000
Par value at maturity.................................. 3,400,000
or:
Twenty payments of $170,000 ..................$3,400,000
Part 4 (Semiannual amortization: $390,000/20 = $19,500)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2015..................... $390,000 $3,010,000
6/30/2015..................... 370,500 3,029,500
12/31/2016..................... 312,000 3,088,000
Part 5
2015
June 30 Bond Interest Expense..................................................189,500
discount amortization.
2015
Dec. 31 Bond Interest Expense..................................................189,500
Discount on Bonds Payable.................................... 19,500
Problem 10-3B (40 minutes)
Part 1
2015
Jan. 1 Cash.................................................................................4,192,932
Part 2
(a) Cash Payment = $3,400,000 x 10% x 6/12 year = $170,000
(b) Premium = $4,192,932 - $3,400,000 = $792,932
Part 3
Twenty payments of $170,000...................$3,400,000
Par value at maturity.................................. 3,400,000
Problem 10-3B (Concluded)
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2015..................... $792,932 $4,192,932
6/30/2016..................... 673,991 4,073,991
12/31/2016..................... 634,344 4,034,344
Part 5
2015
June 30 Bond Interest Expense..................................................130,353
2015
Dec. 31 Bond Interest Expense..................................................130,353
Problem 10-4B (45 minutes)
Part 1
Ten payments of $14,400*.........................$ 144,000
Par value at maturity.................................. 320,000
*$320,000 x 0.09 x ½ = $14,400
or:
Ten payments of $14,400...........................$ 144,000
Total bond interest expense.....................$ 131,012
Part 2
Straight-line amortization table ($12,988/10 = $1,299**)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2015 $12,988 $332,988
6/30/2015 11,689 331,689
12/31/2017 5,194 325,194
6/30/2018 3,895 323,895
Problem 10-4B (Concluded)
Part 3
2015
June 30 Bond Interest Expense..................................................13,101
premium amortization.
2015
Dec. 31 Bond Interest Expense..................................................13,101
premium amortization.
Problem 10-5B (60 minutes)
Part 1
2015
Jan. 1 Cash.................................................................................198,494
Part 2
Thirty payments of $7,200*........................ $ 216,000
Par value at maturity.................................. 240,000
$240,000 x 0.06 x ½ = $7,200
or:
Thirty payments of $7,200*....................... $ 216,000
Part 3 Straight-line amortization table ($41,506/30= $1,384)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2015 $41,506 $ 198,494
6/30/2016 37,354 202,646
12/31/2016 35,970 204,030
Problem 10-5B (Concluded)
Part 4
2015
June 30 Bond Interest Expense..................................................8,584
discount amortization.
2015
Dec. 31 Bond Interest Expense..................................................8,584
discount amortization.
Problem 10-6B (45 minutes)
Part 1 Amount of Payment
Note balance...................................................................$150,000
Number of periods.........................................................3
Part 2
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[10% x (A)]
+
(C)
Debit
Notes
Payable
[(D) - (B)]
=
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) - (C)]
9/30/2016..............$150,000 $15,000 $ 45,316 $ 60,316 $104,684
9/30/2018..............54,836 5,480 * 54,836 60,316 0
$30,948 $150,000 $180,948
*Adjusted for rounding.
Part 3
2015
Dec. 31 Interest Expense.............................................................3,750
2016
Sept. 30 Interest Expense.............................................................11,250
Interest Payable..............................................................3,750
Problem 10-7B (30 minutes)
Part 1
Atlas Company
Bryan Company
Part 2
Bryan’s debt-to-equity ratio is much higher than that for Atlas. This implies
that Bryan has a more risky financing structure. Before concluding that
Problem 10-8BB (60 minutes)
Part 1
2015
Jan. 1 Cash.................................................................................198,494
Part 2
Thirty payments of $7,200*........................ $ 216,000
Par value at maturity.................................. 240,000
Total bond interest expense..................... $ 257,506
*$240,000 x 0.06 x ½ = $7,200
or:
Thirty payments of $7,200......................... $ 216,000
Total bond interest expense..................... $ 257,506
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[3% x $240,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Discount
Amortization
[(B) - (A)]
(D)
Unamortized
Discount
[Prior (D) - (C)]
(E)
Carrying
Value
[$240,000 - (D)]
1/01/2015 $41,506 $198,494
6/30/2015 $7,200 $7,940 $740 40,766 199,234
12/31/2016 7,200 8,032 832 38,365 201,635
