Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

978-0078025754 Chapter 10 Solution Manual Part 3

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
$ 81,250
250,000
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
$ 81,250
250,000
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
$ 59,400
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.

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