EC–6
Req. 1
Face value 2,000 bonds x $1,000 each $2,000,000
Present value factor (8%, n=10, Table C.2) x 0.46319
Present value of face amount 926,380
EC–6 (continued)
Req. 2
Face value 2,000 bonds x $1,000 each $2,000,000
Present value factor (7%, n=10, Table C.2) x 0.50835
EC–6 (continued)
Req. 3
Face value 2,000 bonds x $1,000 each $2,000,000
Present value factor (9%, n=10, Table C.2) x 0.42241
EC-7
(i) $100,000 x 1.21665 = $121,665.
EC-7 (continued)
ANSWERS TO COACHED PROBLEM
CPC–1
Option 1:
$1,000,000 8.51356
=
$8,513,560
CPC-2
Req. 1
$100,000 x 0.90703 = $90,703
CPC-2 (continued)
Req. 3
Interest = Principal x Rate x Time
= $90,703 x 5% x12/12
= $4,535
Interest Expense ………………………………………………..
4,535
Notes Payable (long-term)* …………………………....
4,535
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account.
Req. 4
Interest = Principal x Rate x Time
= ($90,703 + $4,535) x 5% x12/12
= $4,762
Interest Expense ………………………………………………..
4,762
Notes Payable (long-term)* …………………………....
4,762
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account.
Req. 5
Notes Payable (long-term)* …………………………..…….
100,000
Cash ……………………………………………………………
100,000
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account.
CPC-3
Req. 1
$10,000 x 2.67301 = $26,730.10 ($26,730 rounded)
Req. 2
Equipment ……………………………………………………….
26,730
Notes Payable (long-term) ……………………………..
26,730
CPC-3 (continued)
Req. 3
Interest = Principal x Rate x Time
= $26,730 x 6% x12/12
= $1,604
Interest Expense ………………………………………………..
1,604
Note Payable (long-term)* …………………………………..
8,396
Cash ……………………………………………………………
10,000
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account.
Req. 4
Interest = Principal x Rate x Time
= ($26,730 – $8,396) x 6% x12/12
= $1,100
Interest Expense ………………………………………………..
1,100
Notes Payable (long-term)* …………………………..…….
8,900
Cash ……………………………………………………………
10,000
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account.
Req. 5
Interest = Principal x Rate x Time
= ($26,730 – $8,396 – 8,900) x 6% x12/12
= $566
Interest Expense ………………………………………………..
566
Notes Payable (long-term)* …………………………..……..
9,434
Cash ……………………………………………………………
10,000
*Technically, the note becomes a current liability at the end of the first year, but for
consistency, we will continue to use the Notes Payable (long-term) account
CPC-4
(a)
(b)