Problem 14-8BB (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
or:
Thirty payments of $7,200…………….……… $ 216,000
Plus discount….………………………………….. 41,506
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
Problem 14-8BB (Concluded)
Part 4
2015
June 30 Bond Interest Expense……………………………….………….7,940
2015
Dec. 31 Bond Interest Expense……………………………….………….7,969
Problem 14-9BB (45 minutes)
Part 1
Ten payments of $14,400…………………..…. $144,000
Par value at maturity………………………….… 320 ,000
Total repaid…………………………….……….….. 464,000
Part 2
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[4.5% x $320,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Premium
Amortization
[(A) – (B)]
(D)
Unamortized
Premium
[Prior (D) – (C)]
(E)
Carrying
Value
[$320,000 + (D)]
1/01/2015 $12,988 $332,988
6/30/2015 $ 14,400 $ 13,320 $ 1,080 11,908 331,908
6/30/2018 14,400 13,033 1,367 4,454 324,454
12/31/2018 14,400 12,978 1,422 3,032 323,032
6/30/2019 14,400 12,921 1,479 1,553 321,553
12/31/2019 14,400 12 ,847* 1,553 0 320,000
$144,000 $131 ,012 $ 12,988
Problem 14-9BB (Concluded)
Part 3
2015
June 30 Bond Interest Expense……………………………….………….13,320
Premium on Bonds Payable……………………………..…….1,080
Cash………………………………………………………………… 14,400
To record six months’ interest and
premium amortization.
2015
Dec. 31 Bond Interest Expense……………….….…………….………..13,276
Part 4
As of December 31, 2017
Cash Flow Table Table Value* Amount Present Value
* Table values are based on a discount rate of 4% (half the annual original market
rate) and 4 periods (semiannual payments).
Comparison to Part 2 Table
Except for a small rounding difference, this present value ($325,807) equals
the market rate at the time of issuance.
Problem 14-10BB (70 minutes)
Part 1
2015
Jan. 1 Cash………………………………………………………………………493,608
Part 2
Eight payments of $29,250*..…….............. $ 234,000
Par value at maturity………………………….… 450 ,000
Total repaid…………………………….……….….. 684,000
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[6.5% x $450,000]
(B)
Bond Interest
Expense
[5% x Prior (E)]
(C)
Premium
Amortization
[(A) – (B)]
(D)
Unamortized
Premium
[Prior (D) – (C)]
(E)
Carrying
Value
[$450,000 + (D)]
1/01/2015 $43,608 $493,608
6/30/2015 $29,250 $24,680 $4,570 39,038 489,038
Problem 14-10BB (Concluded)
Part 4
2015
June 30 Bond Interest Expense……………………………….………….24,680
2015
Dec. 31 Bond Interest Expense……………………………….………….24,452
Part 5
2017
Jan. 1 Bonds Payable ……………………………………………………...450,000
Part 6
If the market rate on the issue date had been 14% instead of 10%, the bonds
would have sold at a discount because the contract rate of 13% 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 14-11BD (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
(10%)
Reduction
of Lease
Liability
Cash
Lease
Payment
Ending
Balance of
Lease
Liability
Year 1 $75,816 $ 7,582* $12,418 $ 20,000 $63,398
Year 5 18,183 1,817** 18,183 20,000 0
$24,184 $75,816 $100,000
* Rounded to nearest dollar.
** Adjusted for prior period rounding errors.
Part 4