Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 14 - Long-Term Liabilities
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
Par value at maturity................................... 250,000
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)]
14-769
Chapter 14 - Long-Term Liabilities
1/01/2015 $5,333 $255,333
6/30/2015 $ 8,125 $ 7,660 $ 465 4,868 254,868
12/31/2015 8,125 7,646 479 4,389 254,389
6/30/2016 8,125 7,632 493 3,896 253,896
12/31/2016 8,125 7,617 508 3,388 253,388
12/31/2019 8 ,125 7 ,515 * 610 0 250,000
$81 ,250 $75 ,917 $5,333
*Adjusted for rounding.
14-770
Chapter 14 - Long-Term Liabilities
Problem 14-9AB (Concluded)
Part 3
2015
June 30 Bond Interest Expense..................................................7,660
premium amortization.
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
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
14-771
Education.
Chapter 14 - Long-Term Liabilities
Part 2
Six payments of $9,900 ............................ $ 59,400
Par value at maturity.................................. 180,000
*$180,000 x 0.11 x ½ = $9,900
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
12/31/2016 9,900 9,122 778 1,670 181,670
14-772
Chapter 14 - Long-Term Liabilities
Problem 14-10AB (Concluded)
Part 4
2015
June 30 Bond Interest Expense..................................................9,228
Premium on Bonds Payable..........................................672
Cash........................................................................... 9,900
To record six months’ interest and
premium amortization.
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
would have sold at a discount because the contract rate of 11% would have been
lower than the market rate.
This change would affect the balance sheet because the bond liability would be
smaller (par value minus a discount instead of par value plus a premium). As the
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)
14-773
Chapter 14 - Long-Term Liabilities
Part 1
Present Value of the Lease Payments
$10,000 x 3.9927 (from Table B.3) = $39,927
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
Year 2 33,121 2,650 7,350 10,000 25,771
* Rounded to nearest dollar.
** Difference due to rounding.
Part 4
14-774
Education.
Chapter 14 - Long-Term Liabilities
PROBLEM SET B
Problem 14-1B (50 minutes)
Part 1
a.
Cash Flow Table Table Value* Amount Present Value
Bond Premium........ $ 6,948
* Table values are based on a discount rate of 5% (half the annual market rate) and 10
periods (semiannual payments).
** $90,000 x 0.12 x ½ = $5,400
b.
2015
Jan. 1 Cash.................................................................................96,948
Premium on Bonds Payable.................................... 6,948
Bonds Payable.......................................................... 90,000
Sold bonds on stated issue date.
Part 2
a.
Cash Flow Table Table Value* Amount Present Value
Price of bonds........ $90,001**
* 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
14-775
Chapter 14 - Long-Term Liabilities
Problem 14-1B (Concluded)
Part 3
a.
Cash Flow Table Table Value* Amount Present Value
* 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
Discount on Bonds Payable..........................................6,326
Bonds Payable.......................................................... 90,000
Sold bonds on stated issue date.
Problem 14-2B (40 minutes)
Part 1
2015
Sold bonds on stated issue date.
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
14-776
