Problem 10-4B (Concluded)
Part 3
2015
June 30
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable ………………….……….
1,299
Cash ……………………………………………….………
To record six months’ interest and
premium amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable ………………….……….
1,299
Cash ……………………………………………….………
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 …………….…………….
Cash ……………………………………………….………
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
8,584
Discount on Bonds Payable …………….…………….
Cash ……………………………………………….………
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]
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 …………….…………….
Cash ……………………………………………….………
To record six months’ interest and
discount amortization.
2015
Dec. 31
Bond Interest Expense …………………………..
7,969
Discount on Bonds Payable …………….…………….
Cash ……………………………………………….………
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.
1,124
To record six months’ interest and
Problem 10–10BB (70 minutes)
Part 1
2015
Jan. 1
Cash …………………………………………………….…
493,608
Premium on Bonds Payable …………….…………….
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