Title: Problem 14-1A
QA_Ori:
Part 1
Instructor note: The first printing of the textbook has an erroneous marginal check figure
of $4,537 that should correctly read $5,437.
a.
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.4564 $40,000 $18,256
* Table values are based on a discount rate of 4% (half the annual market rate)
b.
2013
Jan. 1 Cash 45,437
Part 2
a.
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.3769 $40,000 $15,076
* Table values are based on a discount rate of 5% (half the annual market rate)
b.
2013
Jan. 1 Cash 4,000
Part 3
a.
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.3118 $40,000 $12,472
* Table values are based on a discount rate of 6% (half the annual market rate)
and 20 periods (semiannual payments).
b.
2013
Title: Problem 14-2A
QA_Ori:
Part 1
2013
Jan. 1 Cash 3,456,448
Part 2
[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout the
bonds’ life because this company uses straight-line amortization.]
Part 3
Thirty payments of $120,000 $3,600,000
or:
Thirty payments of $120,000 $ 3,600,000
Part 4
(Semiannual amortization: $543,552/30 = $18,118.4)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2013 $543,552 $3,456,448
Part 5
2013
June 30 Bond Interest Expense 138,118
2013
Dec. 31 Bond Interest Expense 138,118
Title: Problem 14-3A
QA_Ori:
Part 1
2013
Jan. 1 Cash 4,895,980
Premium on Bonds Payable 895,980
Part 2
Part 3
Thirty payments of $120,000 $3,600,000
or:
Thirty payments of $120,000 $ 3,600,000
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2013 $895,980 $4,895,980
Part 5
2013
June 30 Bond Interest Expense 90,134
2013
Dec. 31 Bond Interest Expense 90,134
Title: Problem 14-4A
QA_Ori:
Part 1
Ten payments of $8,125* $ 81,250
or:
Ten payments of $8,125 $ 81,250
Part 2
Straight-line amortization table ($5,333/10 = $533*)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2013 $5,333 $255,333
6/30/2013 4,800 254,800
* Rounded to nearest dollar. ** Adjusted for rounding.
Part 3
2013
June 30 Bond Interest Expense 7,592
2013
Dec. 31 Bond Interest Expense 7,592
Title: Problem 14-5A
QA_Ori:
Part 1
Ten payments of $8,125* $ 81,250
or:
Ten payments of $8,125 $ 81,250
Part 2
Semiannu
al
Interest
Period-En
d
(A)
Cash Interest
Paid
[3.25% x
$250,000]
(B)
Bond Interest
Expense
[3% x Prior
(E)]
(C)
Premium
Amortizatio
n
[(A) – (B)]
(D)
Unamortize
d
Premium
[Prior (D) –
(C)]
(E)
Carrying
Value
[$250,000 +
(D)]
1/01/2013
$5,333 $255,333
6/30/2013
$ 8,125 $ 7,660 $ 465 4,868 254,868
12/31/201
3
8,125 7,646 479 4,389 254,389
8,125 7,632 493 3,896 253,896
*Adjusted for rounding.
Part 3
2013
June 30 Bond Interest Expense 7,660
2013
Dec. 31 Bond Interest Expense 7,646
premium amortization.
Part 4
As of December 31, 2015
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 column (E) of
Title: Problem 14-6A
QA_Ori:
Part 1
2013
Jan. 1 Cash 292,181
Part 2
Eight payments of $8,125* $ 65,000
or:
Eight payments of $8,125 $ 65,000
Part 3 Straight-line amortization table ($32,819/8 =$4,102*)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2013 $32,819 $292,181
6/30/2013 28,717 296,283
*(rounded to nearest dollar)
Part 4
2013
June 30 Bond Interest Expense 12,227
2013
Dec. 31 Bond Interest Expense 12,227
Part 5
If the market interest rate on the issue date had been 4% instead of 8%, the bonds
would have sold at a premium because the contract rate of 5% would have been greater
than the market rate.
Title: Problem 14-7A
QA_Ori:
Part 1
2013
Jan. 1 Cash 292,181
Part 2
Eight payments of $8,125* $ 65,000
or:
Eight payments of $8,125 $ 65,000
Part 3
Semiannu
al
Interest
Period-En
d
(A)
Cash Interest
Paid
[2.5% x
$325,000]
(B)
Bond Interest
Expense
[4% x Prior
(E)]
(C)
Discount
Amortizatio
n
[(B) – (A)]
(D)
Unamortize
d
Discount
[Prior (D) –
(C)]
(E)
Carrying
Value
[$325,000 –
(D)]
1/01/2013
$32,819 $292,181
$8,125 $11,687 $3,562 29,257 295,743
4
Part 4
2013
June 30 Bond Interest Expense 11,687
2013
Dec. 31 Bond Interest Expense 11,830
