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Problem 10-3A (Concluded)
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2015 .....................
$895,980
$4,895,980
6/30/2015 .....................
866,114
4,866,114
12/31/2015 .....................
836,248
4,836,248
6/30/2016 .....................
806,382
4,806,382
12/31/2016 .....................
776,516
4,776,516
Part 5
2015
June 30
Bond Interest Expense ................................
90,134
Premium on Bonds Payable ................................
29,866
Cash ................................................................
120,000
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense ................................
90,134
Premium on Bonds Payable ................................
29,866
Cash ................................................................
120,000
To record six months’ interest and
premium amortization.
Problem 10-4A (45 minutes)
Part 1
Ten payments of $8,125* ..........................
$ 81,250
Par value at maturity................................
250,000
Total repaid .................................................
331,250
Less amount borrowed .............................
(255,333)
Total bond interest expense .....................
$ 75,917
*$250,000 x 0.065 x ½ = $8,125
or:
Ten payments of $8,125 ............................
$ 81,250
Less premium .............................................
(5,333)
Total bond interest expense .....................
$ 75,917
Part 2
Straight-line amortization table ($5,333/10 = $533*)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2015
$5,333
$255,333
6/30/2015
4,800
254,800
12/31/2015
4,267
254,267
6/30/2016
3,734
253,734
12/31/2016
3,201
253,201
6/30/2017
2,668
252,668
12/31/2017
2,135
252,135
6/30/2018
1,602
251,602
12/31/2018
1,069
261,069
6/30/2019
533**
250,533
12/31/2019
0
250,000
* Rounded to nearest dollar. ** Adjusted for rounding.
Problem 10-4A (Concluded)
Part 3
2015
June 30
Bond Interest Expense ................................
7,592
Premium on Bonds Payable ................................
533
Cash ................................................................
8,125
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense ................................
7,592
Premium on Bonds Payable ................................
533
Cash ................................................................
8,125
To record six months’ interest and
premium amortization.
Problem 10-5A (60 minutes)
Part 1
2015
Jan. 1
Cash ................................................................
292,181
Discount on Bonds Payable ................................
32,819
Bonds Payable .........................................................
325,000
Sold bonds on stated issue date.
Part 2
Eight payments of $8,125* ...................
$ 65,000
Par value at maturity.............................
325,000
Total repaid ............................................
390,000
Less amount borrowed ........................
(292,181)
Total bond interest expense ................
$ 97,819
*$325,000 x 0.05 x ½ = $8,125
or:
Eight payments of $8,125 .....................
$ 65,000
Plus discount ........................................
32,819
Total bond interest expense ................
$ 97,819
Part 3 Straight-line amortization table ($32,819/8 =$4,102*)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2015
$32,819
$292,181
6/30/2015
28,717
296,283
12/31/2015
24,615
300,385
6/30/2016
20,513
304,487
12/31/2016
16,411
308,589
*(rounded to nearest dollar)
Problem 10-5A (Concluded)
Part 4
2015
June 30
Bond Interest Expense ................................
12,227
Discount on Bonds Payable ................................
4,102
Cash ................................................................
8,125
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense ................................
12,227
Discount on Bonds Payable ................................
4,102
Cash ................................................................
8,125
To record six months’ interest and
discount amortization.
Problem 10-6A (45 minutes)
Part 1 Amount of Payment
Note balance ................................................................
$200,000
Number of periods .........................................................
5
Interest rate ................................................................
8%
Value from Table B.3 .....................................................
3.9927
Payment ($200,000 / 3.9927) ................................
$ 50,091
rounded to 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)]
10/31/2016 ............
$200,000
$ 16,000
$ 34,091
$ 50,091
$165,909
10/31/2017 ............
165,909
13,273
36,818
50,091
129,091
10/31/2018 ............
129,091
10,327
39,764
50,091
89,327
10/31/2019 ............
89,327
7,146
42,945
50,091
46,382
10/31/2020 ............
46,382
3,709*
46,382
50,091
0
$ 50,455
$200,000
$250,455
* Adjusted for rounding
Part 3
2015
Dec. 31
Interest Expense ............................................................
2,667
Interest Payable .......................................................
2,667
Accrued interest on the installment
note payable ($16,000 x 2/12) (rounded).
2016
Oct. 31
Interest Expense ............................................................
13,333
Interest Payable .............................................................
2,667
Notes Payable ................................................................
34,091
Cash ..........................................................................
50,091
Record first payment on installment note
(interest expense = $16,000 - $2,667).
Problem 10-7A (20 minutes)
Part 1
Pulaski Company debt-to-equity = $360,000 / $500,000 = 0.72
Problem 10-8AB (60 minutes)
Part 1
2015
Jan. 1
Cash ................................................................
292,181
Discount on Bonds Payable ................................
32,819
Bonds Payable .........................................................
325,000
Sold bonds on stated issue date.
Part 2
Eight payments of $8,125* ...................
$ 65,000
Par value at maturity.............................
325,000
Total repaid ............................................
390,000
Less amount borrowed ........................
(292,181)
Total bond interest expense ................
$ 97,819
*$325,000 x 0.05 x ½ = $8,125
or:
Eight payments of $8,125 .....................
$ 65,000
Plus discount ........................................
32,819
Total bond interest expense ................
$ 97,819
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[2.5% x $325,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Discount
Amortization
[(B) - (A)]
(D)
Unamortized
Discount
[Prior (D) - (C)]
(E)
Carrying
Value
[$325,000 - (D)]
1/01/2015
$32,819
$292,181
6/30/2015
$8,125
$11,687
$3,562
29,257
295,743
12/31/2015
8,125
11,830
3,705
25,552
299,448
6/30/2016
8,125
11,978
3,853
21,699
303,301
12/31/2016
8,125
12,132
4,007
17,692
307,308
Problem 10-8AB (Concluded)
Part 4
2015
June 30
Bond Interest Expense ................................
11,687
Discount on Bonds Payable ................................
3,562
Cash ................................................................
8,125
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense ................................
11,830
Discount on Bonds Payable ................................
3,705
Cash ................................................................
8,125
To record six months’ interest and
discount amortization.
Problem 10-9AB (45 minutes)
Part 1
Ten payments of $8,125* ...........................
$ 81,250
Par value at maturity................................
250,000
Total repaid ..................................................
331,250
Less amount borrowed ..............................
(255,333)
Total bond interest expense ......................
$ 75,917
*$250,000 x 0.065 x ½ =$8,125
or:
Ten payments of $8,125 ............................
$ 81,250
Less premium .............................................
(5,333)
Total bond interest expense .....................
$ 75,917
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
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
6/30/2017
8,125
7,602
523
2,865
252,865
12/31/2017
8,125
7,586
539
2,326
252,326
6/30/2018
8,125
7,570
555
1,771
251,771
12/31/2018
8,125
7,553
572
1,199
251,199
6/30/2019
8,125
7,536
589
610
250,610
12/31/2019
8,125
7,515*
610
0
250,000
$81,250
$75,917
$5,333
*Adjusted for rounding.
