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 …………………………..
Premium on Bonds Payable ………………….……….
Cash ……………………………………………….………
120,000
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
Premium on Bonds Payable ………………….……….
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 …………………………..
Premium on Bonds Payable ………………….……….
Cash ……………………………………………….………
8,125
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
Premium on Bonds Payable ………………….……….
Cash ……………………………………………….………
8,125
To record six months’ interest and
premium amortization.
Problem 10-5A (60 minutes)
Part 1
2015
Jan. 1
Cash …………………………………………………….…
Discount on Bonds Payable ………………….……….
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 ………………………………………..……………..
Number of periods ………………………………..……………….
Interest rate ………………………………………….……………
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 …………………………………………………….…
Discount on Bonds Payable ………………….……….
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 …………………………..
Discount on Bonds Payable …………….…………….
3,562
Cash ……………………………………………….………
8,125
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
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.