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Problem 10-4B (Concluded)
Part 3
2015
June 30
Bond Interest Expense ................................
13,101
Premium on Bonds Payable ................................
1,299
Cash ................................................................
14,400
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense ................................
13,101
Premium on Bonds Payable ................................
1,299
Cash ................................................................
14,400
To record six months’ interest and
premium amortization.
Problem 10-5B (60 minutes)
Part 1
2015
Jan. 1
Cash ................................................................
198,494
Discount on Bonds Payable ................................
41,506
Bonds Payable .........................................................
240,000
Sold bonds on stated issue date.
Part 2
Thirty payments of $7,200* ........................
$ 216,000
Par value at maturity................................
240,000
Total repaid .................................................
456,000
Less amount borrowed .............................
(198,494)
Total bond interest expense .....................
$ 257,506
$240,000 x 0.06 x ½ = $7,200
or:
Thirty payments of $7,200* .......................
$ 216,000
Plus discount .............................................
41,506
Total bond interest expense .....................
$ 257,506
* Semiannual interest payment, computed as $240,000 x 6% x ½ year.
Part 3 Straight-line amortization table ($41,506/30= $1,384)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2015
$41,506
$ 198,494
6/30/2015
40,122
199,878
12/31/2015
38,738
201,262
6/30/2016
37,354
202,646
12/31/2016
35,970
204,030
Problem 10-5B (Concluded)
Part 4
2015
June 30
Bond Interest Expense ................................
8,584
Discount on Bonds Payable ................................
1,384
Cash ................................................................
7,200
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense ................................
8,584
Discount on Bonds Payable ................................
1,384
Cash ................................................................
7,200
To record six months’ interest and
discount amortization.
Problem 10-6B (45 minutes)
Part 1 Amount of Payment
Note balance ................................................................
$150,000
Number of periods .........................................................
3
Interest rate ................................................................
10%
Value from Table B.3 .....................................................
2.4869
Payment ($150,000 / 2.4869) ................................
$ 60,316
Part 2
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[10% x (A)]
+
(C)
Debit
Notes
Payable
[(D) - (B)]
=
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) - (C)]
9/30/2016 .............
$150,000
$15,000
$ 45,316
$ 60,316
$104,684
9/30/2017 .............
104,684
10,468
49,848
60,316
54,836
9/30/2018 .............
54,836
5,480*
54,836
60,316
0
$30,948
$150,000
$180,948
*Adjusted for rounding.
Part 3
2015
Dec. 31
Interest Expense ............................................................
3,750
Interest Payable .......................................................
3,750
Accrued interest on the installment
note payable ($15,000 x 3/12).
2016
Sept. 30
Interest Expense ............................................................
11,250
Interest Payable .............................................................
3,750
Notes Payable ................................................................
45,316
Cash ..........................................................................
60,316
Record first payment on installment note
(interest expense = $15,000 - $3,750).
Problem 10-7B (30 minutes)
Part 1
Atlas Company
Debt-to-equity ratio = $80,000 / $100,000 = 0.80
Problem 10-8BB (60 minutes)
Part 1
2015
Jan. 1
Cash ................................................................
198,494
Discount on Bonds Payable ................................
41,506
Bonds Payable .........................................................
240,000
Sold bonds on stated issue date.
Part 2
Thirty payments of $7,200* ........................
$ 216,000
Par value at maturity................................
240,000
Total repaid .................................................
456,000
Less amount borrowed .............................
(198,494)
Total bond interest expense .....................
$ 257,506
*$240,000 x 0.06 x ½ = $7,200
or:
Thirty payments of $7,200 .........................
$ 216,000
Plus discount .............................................
41,506
Total bond interest expense .....................
$ 257,506
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[3% x $240,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Discount
Amortization
[(B) - (A)]
(D)
Unamortized
Discount
[Prior (D) - (C)]
(E)
Carrying
Value
[$240,000 - (D)]
1/01/2015
$41,506
$198,494
6/30/2015
$7,200
$7,940
$740
40,766
199,234
12/31/2015
7,200
7,969
769
39,997
200,003
6/30/2016
7,200
8,000
800
39,197
200,803
12/31/2016
7,200
8,032
832
38,365
201,635
Problem 10-8BB (Concluded)
Part 4
2015
June 30
Bond Interest Expense ................................
7,940
Discount on Bonds Payable ................................
740
Cash ................................................................
7,200
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense ................................
7,969
Discount on Bonds Payable ................................
769
Cash ................................................................
7,200
To record six months’ interest and
discount amortization.
Problem 10-9BB (45 minutes)
Part 1
Ten payments of $14,400 ..........................
$144,000
Par value at maturity................................
320,000
Total repaid .................................................
464,000
Less amount borrowed .............................
(332,988)
Total bond interest expense .....................
$131,012
or:
Ten payments of $14,400 ..........................
$144,000
Less premium .............................................
(12,988)
Total bond interest expense .....................
$131,012
Part 2
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[4.5% x $320,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Premium
Amortization
[(A) - (B)]
(D)
Unamortized
Premium
[Prior (D) - (C)]
(E)
Carrying
Value
[$320,000 + (D)]
1/01/2015
$12,988
$332,988
6/30/2015
$ 14,400
$ 13,320
$ 1,080
11,908
331,908
12/31/2015
14,400
13,276
1,124
10,784
330,784
6/30/2016
14,400
13,231
1,169
9,615
329,615
12/31/2016
14,400
13,185
1,215
8,400
328,400
6/30/2017
14,400
13,136
1,264
7,136
327,136
12/31/2017
14,400
13,085
1,315
5,821
325,821
6/30/2018
14,400
13,033
1,367
4,454
324,454
12/31/2018
14,400
12,978
1,422
3,032
323,032
6/30/2019
14,400
12,921
1,479
1,553
321,553
12/31/2019
14,400
12,847*
1,553
0
320,000
$144,000
$131,012
$ 12,988
*Adjusted for rounding.
Problem 10-9BB (Concluded)
Part 3
2015
June 30
Bond Interest Expense ................................
13,320
Premium on Bonds Payable ................................
1,080
Cash ................................................................
14,400
To record six months’ interest and
premium amortization.
Problem 10-10BB (70 minutes)
Part 1
2015
Jan. 1
Cash ................................................................
493,608
Premium on Bonds Payable ................................
43,608
Bonds Payable .........................................................
450,000
Sold bonds on stated issue date.
Part 2
Eight payments of $29,250* ......................
$ 234,000
Par value at maturity................................
450,000
Total repaid .................................................
684,000
Less amount borrowed .............................
(493,608)
Total bond interest expense .....................
$ 190,392
*$450,000 x 0.13 x ½ = $29,250
or:
Eight payments of $29,250 ........................
$ 234,000
Less premium .............................................
(43,608)
Total bond interest expense .....................
$ 190,392
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[6.5% x $450,000]
(B)
Bond Interest
Expense
[5% x Prior (E)]
(C)
Premium
Amortization
[(A) - (B)]
(D)
Unamortized
Premium
[Prior (D) - (C)]
(E)
Carrying
Value
[$450,000 + (D)]
1/01/2015
$43,608
$493,608
6/30/2015
$29,250
$24,680
$4,570
39,038
489,038
12/31/2015
29,250
24,452
4,798
34,240
484,240
6/30/2016
29,250
24,212
5,038
29,202
479,202
12/31/2016
29,250
23,960
5,290
23,912
473,912
