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