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Ex. 10.1
Annual Unpaid
Payment Balance
SOLUTIONS TO EXERCISES
Reduction
in Unpaid
Balance
You would need to save $7,760, as shown in the following loan amortization table:
Interest
Period
Date of Graduation
Interest
Annual
Expense @ 8%
Ex. 10.4 a.
$ 7,200,000
580,000
Total payroll related costs:
Wages and salaries expense …………………………
Payroll taxes …………………………………………
…
(A) (B)
Interest Expense
Ex. 10.6 a. Amortization Table
(12% Note Payable for $150,000; Payable
in Monthly Installments of $1,543)
Reduction in
Monthly
Ex. 10.8 a. Apr. 30 50,375
Bonds Payable ……………………………
…
50,000
Bond Interest Payable ……………………
…
375
Cash ………………………………………………
Issued $50,000 face value of 9%, 30-year bonds
Ex. 10.9 a. 2015
Apr. 1 8,160,000
160,000
8,000,000
To record issuance of bonds at 102.
Cash ………………………………………………
Premium on Bonds Payable ……………
…
Bond Payable ……………………………
…
Ex. 10.10 a. 2015
July 1 4,900,000
100,000
5,000,000
5,000,000
(2)
Cash ……………………………………
…
consequently, reduces annual net income.
To retire bonds at maturity.
Amortization of bond discount is a noncash component of annual interest
expense and has no effect upon annual net cash flow from operating
activities. (Receipt of cash upon issuance of bonds and payment of cash to
retire bonds at maturity are both classified as financing activities.)
To record issuance of bonds at 98.
Cash ……………………………………………
…
Discount on Bonds Payable ……………………
…
Bonds Payable …………………………
…
Ex. 10.11 a. (1)
Total liabilities =$349,792 =57%
(2)
Operating income =$13,028 =0.46 times
Operating income = $304,672 =7.70 times
Debt ratio:
Pemco:
Toyco:
Interest expense
Interest coverage ratio:
Toyco:
$28,026
Ex. 10.12 a. 2,500
Cash …………………………………………………
…
2,500
b. 76,021
d.
Rent Expense ………………………………………………
Leased Equipment ………………………………………
…
To record monthly rental expense on equipment under an operating lease
agreement.
balance sheet.
If the lease is unquestionably a capital lease, it would be unacceptable, unethical
and possibly illegal for a publicly owned company to account for it as an
operating lease. Such presentation would understate the company’s total
liabilities.
Ex. 10.14
Deferred taxes are the income taxes that will become due in future years upon
earnings that already have been reported in a company’s income statement.
Deferred taxes arise because of timing differences between the recognition of
25 Minutes, Easy
Current Long-Term Owners'
Transaction Revenue - Expenses = Net Income Assets = Liabilities + Liabilities + Equity
a. NE I D NE I NE D
b. NE NE NE NE I D NE
c. NE I D D I NE D
d. I NE I NE D NE I
l. NE I D NE I D D
m. NE I D NE I NE D
SOLUTIONS TO PROBLEMS SET
A
PROBLEM 10.1
A
TECHNOLOGY SPECIALISTS, INC.
Income Statement Balance Sheet
