Title: Problem 14-8A
QA_Ori:
Part 1
2013
Jan. 1 Cash 184,566
Part 2
Six payments of $9,900 $ 59,400
or:
Six payments of $9,900 $ 59,400
Part 3
Semiannu
al
Interest
Period-En
d
(A)
Cash Interest
Paid
[5.5% x
$180,000]
(B)
Bond Interest
Expense
[5% x Prior
(E)]
(C)
Premium
Amortizatio
n
[(A) – (B)]
(D)
Unamortize
d
Premium
[Prior (D) –
(C)]
(E)
Carrying
Value
[$180,000 +
(D)]
1/01/2013
$4,566 $184,566
4
Part 4
2013
June 30 Bond Interest Expense 9,228
2013
Dec. 31 Bond Interest Expense 9,195
Part 5
2015
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 statement of cash flows would show a smaller amount of cash received from
Title: Problem 14-9A
QA_Ori:
Part 1
Amount of Payment
Note balance $200,000
nearest dollar
Part 2
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[8% x (A)]
+
(C)
Debit Notes
Payable [(D)
– (B)] =
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) – (C)]
10/31/2014 $200,000 $ 16,000 $ 34,091 $ 50,091 $165,909
10/31/2015 165,909 13,273 36,818 50,091 129,091
* Adjusted for rounding
Part 3
2013
Dec. 31 Interest Expense 2,667
2014
Oct. 31 Interest Expense 13,333
Title: Problem 14-10A
QA_Ori:
Part 1
Part 2
Scott’s debt-to-equity ratio is higher than Pulaski’s. This implies that Scott is more risky.
However, before deciding if either company’s debt-to-equity ratio is too high (or too low),
Title: Problem 14-11A
QA_Ori:
Part 1
Part 2
Leased Asset—Office Equipment 39,927
Lease Liability 39,927
To record capital lease of office equipment.
Part 3
Instructor note: A first printing of the textbook erroneously read that the beginning
balance of the lease liability was $79,854, which should correctly have read $39,927.
Capital Lease Liability Payment (Amortization) Schedule
Period
Ending
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—Office Equipment 7,985
Title: Problem 14-1
QA_Ori:
Part 1
a.
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.6139 $90,000 $55,251
Interest (annuity) B.3 7.7217 5,400** 41,697
* Table values are based on a discount rate of 5% (half the annual market rate)
and 10 periods (semiannual payments).
b.
2013
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)
**Difference due to rounding
b.
2013
Jan. 1 Cash 90,000
Part 3
a.
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.5083 $90,000 $45,747
* Table values are based on a discount rate of 7% (half the annual market rate)
and 10 periods (semiannual payments).
b.
2013
Jan. 1 Cash 83,674
Title: Problem 14-2B
QA_Ori:
Part 1
2013
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
Part 3
Twenty payments of $170,000 $3,400,000
or:
Part 4
(Semiannual amortization: $390,000/20 = $19,500)
Semiannual
Period-End
Unamortized Discount Carrying
Value
1/01/2013 $390,000 $3,010,000
Part 5
2013
June 30 Bond Interest Expense 189,500
2013
Dec. 31 Bond Interest Expense 189,500
Title: Problem 14-3B
QA_Ori:
Part 1
2013
Jan. 1 Cash 4,192,932
Part 2
(a) Cash Payment = $3,400,000 x 10% x 6/12 year = $170,000
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
Period-End
Unamortized
Premium
Carrying
Value
1/01/2013 $792,932 $4,192,932
Part 5
QA_Ori:
2013
June 30 Bond Interest Expense 130,353
2013
Dec. 31 Bond Interest Expense 130,353
Title: Problem 14-4B
QA_Ori:
Part 1
Ten payments of $14,400* $ 144,000
or:
Ten payments of $14,400 $ 144,000
Part 2
Straight-line amortization table ($12,988/10 = $1,299**)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2013 $12,988 $332,988
6/30/2013 11,689 331,689
* Adjusted for rounding.
**Rounded to nearest dollar.
Part 3
2013
June 30 Bond Interest Expense 13,101
2013
Dec. 31 Bond Interest Expense 13,101
Title: Problem 14-5B
QA_Ori:
Part 1
or:
Ten payments of $14,400 $144,000
Part 2
Semiannu
al
Interest
Period-En
d
(A)
Cash Interest
Paid
[4.5% x
$320,000]
(B)
Bond Interest
Expense
[4% x Prior
(E)]
(C)
Premium
Amortizatio
n
[(A) – (B)]
(D)
Unamortize
d
Premium
[Prior (D) –
(C)]
(E)
Carrying
Value
[$320,000 +
(D)]
1/01/2013
$12,988 $332,988
$ 14,400 $ 13,320 $ 1,080 11,908 331,908
6/30/2014
12/31/201
4
14,400 13,185 1,215 8,400 328,400
14,400 13,136 1,264 7,136 327,136
*Adjusted for rounding.
Part 3
2013
June 30 Bond Interest Expense 13,320
2013
Dec. 31 Bond Interest Expense 13,276
Part 4
As of December 31, 2015
Cash Flow Table Table Value* Amount Present Value
Par value B.1 0.8548 $320,000 $273,536
* 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 carrying
Title: Problem 14-6B
QA_Ori:
Part 1
2013
Jan. 1 Cash 198,494
Part 2
Thirty payments of $7,200*$ 216,000
or:
Thirty payments of $7,200* $ 216,000
Part 3
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2013 $41,506 $ 198,494
Part 4
2013
June 30 Bond Interest Expense 8,584
2013
Dec. 31 Bond Interest Expense 8,584
Discount on Bonds Payable 1,384
