March 26, 2020

Problem 10-3A (Concluded)

Part 4

Semiannual

Period-End

Unamortized

Premium

Carrying

Value

1/01/2015 .....................

$895,980

$4,895,980

Part 5

2015

2015

Problem 10-4A (45 minutes)

Part 1

Ten payments of $8,125* ..........................

$ 81,250

Par value at maturity ................................

250,000

Total repaid .................................................

331,250

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

Problem 10-4A (Concluded)

Part 3

2015

June 30

Bond Interest Expense ................................

7,592

Premium on Bonds Payable ................................

533

Problem 10-5A (60 minutes)

Part 1

2015

Jan. 1

Cash ................................................................

292,181

Part 2

Eight payments of $8,125* ...................

$ 65,000

Par value at maturity ............................

325,000

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

*(rounded to nearest dollar)

Problem 10-5A (Concluded)

Part 4

2015

June 30

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.

Problem 10-6A (45 minutes)

Part 1 Amount of Payment

Note balance ................................................................

$200,000

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

* 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).

Problem 10-7A (20 minutes)

Part 1

Part 2

Scott’s debt-to-equity ratio is higher than Pulaski's. This implies that Scott

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

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

Problem 10-8AB (Concluded)

Part 4

2015

June 30

Bond Interest Expense ................................

11,687

2015

Dec. 31

Bond Interest Expense ................................

11,830

Problem 10-9AB (45 minutes)

Part 1

Ten payments of $8,125* ...........................

$ 81,250

Par value at maturity ................................

250,000

Total repaid ..................................................

331,250

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)]

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

*Adjusted for rounding.

Problem 10-9AB (Concluded)

Part 3

2015

June 30

Bond Interest Expense ................................

7,660

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 10-10AB (60 minutes)

Part 1

2015

Jan. 1

Cash ................................................................

184,566

Part 2

Six payments of $9,900 ............................

$ 59,400

Par value at maturity ................................

180,000

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

6/30/2015

$9,900

$9,228

$672

3,894

183,894

Problem 10-10AB (Concluded)

Part 4

2015

June 30

Bond Interest Expense ................................

9,228

Part 5

2017

Jan. 1

Bonds Payable ..............................................................

180,000

Premium on Bonds Payable ................................

1,670

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.

Problem 10-11AD (35 minutes)

Part 1

Part 2

Part 3

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

Part 4

PROBLEM SET B

Problem 10-1B (50 minutes)

Part 1

a.

Cash Flow

Table

Table Value*

Amount

Present Value

Par value .................

B.1

0.6139

$90,000

$55,251

* 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.

Part 2

a.

Cash Flow

Table

Table Value*

Amount

Present Value

b.