© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Req. 1
January 1:
Cash ……………………………………………………………………….
300,328
Bonds Payable ……………………………………………………..
250,000
Premium on Bonds Payable ……………………………………
50,328
Req. 2
December 31:
Interest Expense ($300,328 x 8% x 12/12) ……………….. …...
24,026
Premium on Bonds Payable ($27,500 – $24,026)……….
3,474
Cash ($250,000 x 11% x 12/12) ………………………………….
27,500
E10–13
Req. 1
January 1:
Cash ………………………………………………………………………....
300,328
Bonds Payable, Net ………………………………………………....
300,328
Req. 2
December 31:
Interest Expense ($300,328 x 8% x 12/12) ……………………...
24,026
Bonds Payable, Net ($27,500 – $24,026) ………………………..
3,474
Cash ($250,000 x 11% x 12/12) ………………………………….
27,500
E10–14
Req. 1
January 1:
Cash …………………………………………………………………….
187,163
Discount on Bonds Payable (+xL) …………………………….
12,837
Bonds Payable ………………………………………………….
200,000
E10–14 (continued)
Req. 2
December 31:
Interest Expense ($16,000 + $1,284) ………………………………
17,284
Discount on Bonds Payable (-xL) ($12,837 ÷ 10 periods) .
1,284
Cash ($200,000 x 8% x 12/12) ……………………………………
16,000
Req. 3
Changes During the Period
Ending Bond Liability Balances
Period
Ended
(A)
Cash
Paid
(B)
Discount
Amortized
(C)
Interest
Expense
(D)
Bonds Payable
(E)
Discount on
Bonds Payable^
(F) (=D-E)
Carrying Value
Start
–
–
–
200,000
12,837
187,163
Yr 1 End
16,000
1,284
17,284
200,000
11,553
188,447
Yr 2 End
16,000
1,284
17,284
200,000
10,269
189,731
Yr 3 End
16,000
1,284
17,284
200,000
8,985
191,015
Yr 4 End
16,000
1,284
17,284
200,000
7,701
192,299
Yr 5 End
16,000
1,284
17,284
200,000
6,417
193,583
Yr 6 End
16,000
1,284
17,284
200,000
5,133
194,867
Yr 7 End
16,000
1,284
17,284
200,000
3,849
196,151
Yr 8 End
16,000
1,284
17,284
200,000
2,565
197,435
Yr 9 End
16,000
1,284
17,284
200,000
1,281
198,719
Yr 10 End
16,000
1,281*
17,281*
200,000
0
200,000
^ Discount on Bonds Payable balance (col. E) = Previous balance – Discount Amortized (col. B)
* Difference caused by rounding.
E10–15
Req. 1
January 1:
Cash …………………………………………………………………….
187,163
Discount on Bonds Payable (+xL) …………………………….
12,837
Bonds Payable …………………………………………………..
200,000
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
E10–15 (continued)
Req. 2
December 31:
Interest Expense ($187,163 x 9% x 12/12) ……………….. ………….
16,845
Discount on Bonds Payable (-xL) ($16,845 – $16,000) …………
845
Cash ($200,000 x 8% x 12/12) ………………………………………….
16,000
Req. 3
Changes During the Period
Ending Bond Liability Balances
Period
Ended
(A)
Interest
Expense
(B)
Cash
Paid
(C)
Discount
Amortized
(D)
Bonds
Payable
(E)
Discount on
Bonds Payable
(F) (=D–E)
Carrying Value
Start
–
–
–
200,000
12,837
187,163
Yr 1 End
16,845
16,000
845
200,000
11,992
188,008
Yr 2 End
16,921
16,000
921
200,000
11,071
188,929
Yr 3 End
17,004
16,000
1,004
200,000
10,067
189,933
Yr 4 End
17,094
16,000
1,094
200,000
8,973
191,027
Yr 5 End
17,192
16,000
1,192
200,000
7,781
192,219
Yr 6 End
17,300
16,000
1,300
200,000
6,481
193,519
Yr 7 End
17,417
16,000
1,417
200,000
5,064
194,936
Yr 8 End
17,544
16,000
1,544
200,000
3,520
196,480
Yr 9 End
17,683
16,000
1,683
200,000
1,837
198,163
Yr 10 End
17,837*
16,000
1,837
200,000
0
200,000
* $198,163 x 9% x 12/12 = $17,835. Reported as $17,837 to correct a cumulative $2 rounding
error.
E10–16
Req. 1
January 1:
Cash ……………………………………………………………………
187,163
Bonds Payable, Net ……………………………………………
187,163
Req. 2
December 31:
Interest Expense ($187,163 x 9% x 12/12) ………………..
16,845
Bonds Payable, Net ($16,845 – $16,000) ……………….
845
Cash ($200,000 x 8% x 12/12) ……………………………..
16,000
Req. 3
Beginning of
Period
Changes During the Period
End of Period
Period
Ended
(A)
Bonds Payable,
Net
(B)
Interest
Expense
(C)
Cash
Paid
(D) = (B) – (C)
Interest Added to
Bonds Payable
(E) = (A) + (D)
Bonds Payable,
Net
Start
187,163
16,845
16,000
845
188,008
Yr 1 End
188,008
16,921
16,000
921
188,929
Yr 2 End
188,929
17,004
16,000
1,004
189,933
Yr 3 End
189,933
17,094
16,000
1,094
191,027
Yr 4 End
191,027
17,192
16,000
1,192
192,219
Yr 5 End
192,219
17,300
16,000
1,300
193,519
Yr 6 End
193,519
17,417
16,000
1,417
194,936
Yr 7 End
194,936
17,544
16,000
1,544
196,480
Yr 8 End
196,480
17,683
16,000
1,683
198,163
Yr 9 End
198,163
17,837*
16,000
1,837
200,000
* $198,163 x 9% x 12/12 = $17,835. Reported $17,837 to correct a cumulative $2 rounding
error.
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
ANSWERS TO COACHED PROBLEMS
CP10–1
Req. 1
Date
Assets
Liabilities
Stockholders’ Equity
January 8
Inventory + 14,000
Accounts Payable
+14,000
January 17
Cash – 14,000
Accounts Payable
– 14,000
April 1
Cash + 40,000
Note Payable
+ 40,000
June 3
Inventory +18,000
Accounts Payable
+ 18,000
July 5
Cash –18,000
Accounts Payable
–18,000
August 1
Cash +6,000
Unearned Revenue
+ 6,000
December 20
Cash +100
Accounts
Receivable –100
December 31
Salaries and Wages
Payable +6,500
Wage Expense (+E)
– 6,500
December 31
Interest Payable
+ 1,800*
Interest Expense
(+E) – 1,800
December 31
Unearned Revenue
– 5,000^
Rent Revenue (+R)
+5,000
* $1,800 = $40,000 x 0.06 x 9/12
^ $5,000 = $6,000 x 5/6 months
CP10–1 (continued)
Req. 2
Transaction
Effect on Ratio
Numerator
Denominator
January 8
Increased
Increased
Increased
January 17
Decreased
Decreased
Decreased
April 1
Increased
Increased
Increased
June 3
Increased
Increased
Increased
July 5
Decreased
Decreased
Decreased
August 1
Increased
Increased
Increased
December 20
NE
NE
NE
December 31
Increased
Increased
No Change
December 31
Increased
Increased
No Change
December 31
Decreased
Decreased
No Change
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
CP10–2
Req. 1
January 8:
Inventory …………………………………………………………….
14,000
Accounts Payable ……………………………………………..
14,000
Purchased merchandise.
January 17:
Accounts Payable ………………………………………………..
14,000
Cash ………………………………………………………………
14,000
Paid January 8 invoice.
Cash …………………………………………………………………..
40,000
Note Payable (short term) ………………………………….
40,000
Borrowed on 12-month, 6%, interest-bearing note.
Inventory …………………………………………………………….
18,000
Accounts Payable …………………………………………….
18,000
Purchased merchandise.
Accounts Payable ………………………………………………..
18,000
Cash ………………………………………………………………
18,000
Paid June 3 invoice.
Cash …………………………………………………………………..
6,000
Unearned Revenue ………………………………………….
6,000
Collected rent revenue for the next 6 months.
Cash …………………………………………………………………..
100
Accounts Receivable ………………………………………..
100
Received payment from customer on account.
CP10–2 (continued)
Req. 2
December 31:
Salaries and Wages Expense. ………………………………..
6,500
Salaries and Wages Payable ……………………………..
6,500
Adjusting entry for unpaid salaries and wages.
Interest Expense . …………………………………………………
1,800
Interest Payable ……………………………………………….
1,800
Adjusting entry for 9 months’ interest on note payable
($40,000 x 6% x 9/12 = $1,800).
Unearned Revenue . ……………………………………………..
5,000
Rent Revenue ………………………………………………….
5,000
Adjusting entry for 5 months’ rent, received in advance on
August 1 ($6,000 x 5/6).
Req. 3
Balance Sheet, December 31:
Current Liabilities
Note Payable …………………………..…………………………
$40,000
Salaries and Wages Payable………………………………..
6,500
Interest Payable ………………………………………………….
1,800
Unearned Revenue ($6,000 – $5,000) …………………..
1,000
Total Current Liabilities …………………………………….
$49,300
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
CP10–2 (continued)
Req. 4
Transaction
Effect on Ratio
Numerator
Denominator
January 8
Increased
Increased
Increased
January 17
Decreased
Decreased
Decreased
April 1
Increased
Increased
Increased
June 3
Increased
Increased
Increased
July 5
Decreased
Decreased
Decreased
August 1
Increased
Increased
Increased
December 20
NE
NE
NE
December 31
Increased
Increased
No Change
December 31
Increased
Increased
No Change
December 31
Decreased
Decreased
No Change
CP10–3
Req. 1
Salaries and Wages Expense ………………………………..
130,000
Withheld Income Tax Payable …………………………….
13,000
FICA Payable …………………………………………………..
10,000
Charitable Contributions Payable ………………………..
2,000
Cash ……………………………………………………………….
105,000
Payroll Tax Expense …………………………………………….
11,300
FICA Payable …………………………………………………..
10,000
State and Federal Unemployment Taxes Payable …
1,300
Req. 2
(a) December 10:
Cash …………………………………………………………………..
3,600
Unearned Revenue ………………………………………….
3,600
Collection of rent revenue for one month.
(b) December 31:
Unearned Revenue ………………………………………………
2,400
Rent Revenue …………………………………………………
2,400
Earned 20 days of rent (20/30 x $3,600 = $2,400).
Alternatively, the collection could have been originally recorded as follows, which
would not require an adjusting entry at December 31:
Cash …………………………………………………………………..
3,600
Rent Revenue …………………………………………………
2,400
Unearned Revenue …….. …………………………….
1,200