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Problem 14-8AB (Concluded)
Part 4
2015
June 30 Bond Interest Expense.................................................11,687
2015
Dec. 31 Bond Interest Expense.................................................11,830
Problem 14-9AB (45 minutes)
Part 1
Ten payments of $8,125* ........................... $ 81,250
or:
Ten payments of $8,125............................ $ 81,250
Part 2
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[3.25% x $250,000]
(B)
Bond Interest
Expense
[3% x Prior (E)]
(C)
Premium
Amortization
[(A) - (B)]
(D)
Unamortized
Premium
[Prior (D) - (C)]
(E)
Carrying
Value
[$250,000 + (D)]
1/01/2015 $5,333 $255,333
6/30/2015 $ 8,125 $ 7,660 $ 465 4,868 254,868
*Adjusted for rounding.
Problem 14-9AB (Concluded)
Part 3
2015
June 30 Bond Interest Expense.................................................7,660
2015
Dec. 31 Bond Interest Expense.................................................7,646
Part 4
As of December 31, 2017
Cash Flow Table Table Value* Amount Present Value
Par value...................... B.1 0.8885 $250,000 $222,125
* Table values are based on a discount rate of 3% (half the annual original market
rate) and 4 periods (semiannual payments).
Comparison to Part 2 Table
This present value ($252,326) equals the carrying value of the bonds in
Problem 14-10AB (60 minutes)
Part 1
2015
Jan. 1 Cash..............................................................................184,566
Sold bonds on stated issue date.
Part 2
Six payments of $9,900 ............................ $ 59,400
Par value at maturity................................. 180,000
or:
Six payments of $9,900............................. $ 59,400
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[5.5% x $180,000]
(B)
Bond Interest
Expense
[5% x Prior (E)]
(C)
Premium
Amortization
[(A) - (B)]
(D)
Unamortized
Premium
[Prior (D) - (C)]
(E)
Carrying
Value
[$180,000 + (D)]
1/01/2015 $4,566 $184,566
6/30/2015 $9,900 $9,228 $672 3,894 183,894
Problem 14-10AB (Concluded)
Part 4
2015
June 30 Bond Interest Expense.................................................9,228
2015
Dec. 31 Bond Interest Expense.................................................9,195
Part 5
2017
Jan. 1 Bonds Payable .............................................................180,000
Part 6
If the market rate on the issue date had been 12% instead of 10%, the bonds
This change would affect the balance sheet because the bond liability would be
The income statement would show larger amounts of bond interest expense over
The statement of cash flows would show a smaller amount of cash received from
borrowing. However, the cash flow statements presented over the life of the
Problem 14-11AD (35 minutes)
Part 1
Present Value of the Lease Payments
Part 2
Part 3
Capital Lease Liability Payment (Amortization) Schedule
Period
Endin
g
Date
Beginning
Balance of
Lease
Liability
Interest on
Lease
Liability
(8%)
Reduction
of Lease
Liability
Cash
Lease
Payment
Ending
Balance of
Lease
Liability
Year 1 $39,927 $ 3,194* $ 6,806 $ 10,000 $33,121
* Rounded to nearest dollar.
** Difference due to rounding.
Part 4
Depreciation Expense—Leased Asset, Off. Equip...................7,985
PROBLEM SET B
Problem 14-1B (50 minutes)
Part 1
a.
Cash Flow Table Table Value* Amount Present Value
Par value................. B.1 0.6139 $90,000 $55,251
* Table values are based on a discount rate of 5% (half the annual market rate) and 10
periods (semiannual payments).
b.
2015
Jan. 1 Cash..............................................................................96,948
Part 2
a.
Cash Flow Table Table Value* Amount Present Value
Par value................. B.1 0.5584 $90,000 $50,256
* Table values are based on a discount rate of 6% (half the annual market rate) and
10 periods (semiannual payments). (Note: When the contract rate and market
rate are the same, the bonds sell at par and there is no discount or premium.)
**Difference due to rounding
b.
2015
Jan. 1 Cash..............................................................................90,000
* Table values are based on a discount rate of 7% (half the annual market rate) and
10 periods (semiannual payments).
b.
2015
Jan. 1 Cash..............................................................................83,674
Problem 14-2B (40 minutes)
Part 1
2015
Jan. 1 Cash..............................................................................3,010,000
Part 2
[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout
the bonds’ life because the company uses straight-line amortization.]
(a) Cash Payment = $3,400,000 x 10% x 6/12 year = $170,000
Problem 14-2B (Concluded)
Part 3
Twenty payments of $170,000.................. $3,400,000
Par value at maturity................................. 3,400,000
or:
Part 4 (Semiannual amortization: $390,000/20 = $19,500)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2015..................... $390,000 $3,010,000
Part 5
2015
June 30 Bond Interest Expense.................................................189,500
2015
Dec. 31 Bond Interest Expense.................................................189,500
discount amortization.
