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Education.
CP10–3 (continued)
Req. 3
Balance sheet at December 31:
Current Liabilities:
Withheld Income Taxes Payable …………………………..
13,000
FICA Payable …………………………………………………….
20,000
Charitable Contributions Payable ………………………….
2,000
State and Federal Unemployment Taxes Payable …..
1,300
Unearned Revenue …………………………………………….
1,200
CP10–4
Req. 1
January 1, 2015—Financial statements:
Case A
Case B
Case C
At 100
At 96
At 102
a.
Bonds payable ………………………………….
$200,000
$200,000
$200,000
b.
Unamortized premium (discount) …………
(8,000
)
4,000
c.
Carrying value …………………………………..
$200,000
$192,000
$204,000
CP10–5
CP10–6
Req. 1
Face value x Quoted price = Bond issue price
$600,000 x 104% = $624,000 received for the issue of the bonds payable.
Req. 2
January 1, 2015:
Cash ……………………………………………………….………….
624,000
Premium on Bonds Payable ………………………………
24,000
Bonds Payable ………………………………………………..
600,000
Req. 3
December 31, 2015:
Premium on Bonds Payable ($24,000 5 periods) ………….
4,800
Interest Expense ($54,000 – $4,800) ……………………………..
49,200
Cash ($600,000 x 9% x 12/12) ………………………………….
54,000
December 31, 2016:
Premium on Bonds Payable ($24,000 5 periods) …………..
4,800
Interest Expense ($54,000 – $4,800) ………………………………
49,200
Cash ($600,000 x 9% x 12/12) ………………………………….
54,000
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Education.
CP10–6 (continued)
Req. 4
Income statements for 2015 & 2016:
(1) show the premium being added to the face value, as follows:
Long-term Liabilities
Bonds Payable
Premium on Bonds Payable
Carrying Value
2015
$600,000
19,200*
$619,200
2016
$600,000
14,400**
$614,400
* ($24,000 – $4,800)
** ($19,200 – $4,800)
or (2) show only the net amount, as follows:
Long-term Liabilities
Bonds Payable, Net
2015
$619,200
2016
$614,400
CP10-7
Req. 1
Face value x Quoted price = Bond issue price
$600,000 x 104% = $624,000 received for the issue of the bonds payable.
Req. 2
January 1, 2015:
Cash ……………………………………………………….………………..
624,000
Premium on Bonds Payable …………………………………….
24,000
Bonds Payable ………………………………………………………
600,000
Premium on Bonds Payable ($54,000 – $49,920)…………….
Premium on Bonds Payable ($54,000 – $49,594)…………….
© 2016 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
CP10-8
Req. 1
Face value x Quoted price (%) = Bond issue price
$600,000 x 104% = $624,000 received for the issue of the bonds payable.
Req. 2
January 1, 2015:
Cash ……………………………………………………….………………..
624,000
Bonds Payable, Net …………………………………………………
624,000
Req. 3
Interest Expense ($624,000 x 8% x 12/12) ……………………..
49,920
Bonds Payable, Net ($54,000 – $49,920) ……………………….
4,080
Cash ($600,000 x 9% x 12/12) ………………………………….
54,000
December 31, 2016:
Interest Expense ($619,920 x 8% x 12/12) ……………………..
49,594
Bonds Payable, Net ($54,000 – $49,594) ……………………….
4,406
Cash ($600,000 x 9% x 12/12) ………………………………….
54,000
Req. 4
Income statement for: 2015 2016
Interest Expense $49,920 * $49,594**
* $49,920 = ($624,000 x 8% x 12/12)
** $49,594 = [($624,000 – $4,080) x 8% x 12/12]
Balance sheet as at December 31:
Long-term Liabilities:
2015
2016
Bonds Payable, Net
$619,920
$615,514
The following T-account shows the source of the balance sheet amounts:
Bonds Payable, Net (L)
624,000 1/1/15
4,080 12/31/15
619,920 12/31/15
4,406 12/31/16
615,514 12/31/16
CP10-9
1. Missing amounts are underlined:
Date
Cash
Interest
Amortization
Balance
Jan. 1, 2015 ………………………..
$6,101
End of Year 2015 …………………
$450
$425
$25
6,076
End of Year 2016 …………………
450
425
25
6,051
End of Year 2017 …………………
450
425
25
6,026
End of Year 2018 …………………
450
424
26
*
6,000
3. Cash received: $6,101 from last column at January 1, 2015.
5. Cash paid for interest: $450 per period x 4 years = $1,800 total.
7. Market interest rate: $425 $6,101 = 7% (rounded).
9. Balance sheet:
(1) show the premium being added to the face value, as follows:
Bonds Payable
Premium on Bonds Payable
Carrying Value
2016
$6,000
51
$6,051
2017
$6,000
26
$6,026
or (2) show only the net amount, as follows:
Bonds Payable, Net
2016
$6,051
2017
$6,026
Education.
CP10-10
1. Missing amounts are underlined:
Date
Cash
Interest
Amortization
Balance
Jan. 1, 2015 ………………………..
$6,101
End of Year 2015 …………………
$450
$427
$23
6,078
End of Year 2016 …………………
450
426
24
6,054
End of Year 2017 …………………
450
424
26
6,028
End of Year 2018 …………………
450
422
28
6,000
2. Maturity (face value) amount: $6,000 from last column at end of year 2018.
4. Premium: $6,101 – $6,000 = $101.
6. Stated rate of interest: $450 $6,000 = 7.5%.
8. Interest expense: 2015, $427; 2016, $426; 2017, $424; 2018, $422.
9. Balance sheet:
(1) show the premium being added to the face value, as follows:
2015
2016
Bonds Payable
Premium on Bonds Payable
Carrying Value
$6,000
78
$6,078
$6,000
54
$6,054
or (2) show only the net amount, as follows:
2015
2016
Bonds Payable, Net
$6,078
$6,054
10-38 Solutions Manual
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Education.
ANSWERS TO GROUP A PROBLEMS
PA10–1
Req. 1
Date
Assets
Liabilities
Stockholders’
Equity
April 30
Cash + 600,000
Note Payable + 600,000
June 6
Inventory +75,000
Accounts Payable +75,000
July 15
Cash –75,000
Accounts Payable –75,000
Aug. 31
Cash +24,000
Unearned Revenue +
24,000
Dec. 31
Salaries and Wages
Payable
+40,000
Salaries and
Wages Expense
(+E) – 40,000
Dec. 31
Interest Payable
+ 24,000*
Interest Expense
(+E) – 24,000
Dec. 31
Unearned Revenue –
16,000**
Service Revenue
(+R) +16,000
* $24,000 = $600,000 x 0.06 x 8/12;
**$16,000 = $24,000 x 4/6
Req. 2
Transaction
Effect
Numerator
Denominator
April 30
Increased
Increased
Increased
June 6
Increased
Increased
Increased
July 15
Decreased
Decreased
Decreased
August 31
Increased
Increased
Increased
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.
PA10–2
Req. 1
April 30:
Cash ……………………………………………………….………….
600,000
Note Payable …………………………………………………..
600,000
June 6:
Inventory …………………………..………………………………..
75,000
Accounts Payable …………………………………………….
75,000
July 15:
Accounts Payable ………………………………………………..
75,000
Cash ………………………………………………………………
75,000
Cash ……………………………………………………….………….
24,000
Unearned Revenue ………………………………………….
24,000
Salary and Wages Expense …………………………..………
40,000
Salaries and Wages Payable ……………………………..
40,000
Interest Expense ($600,000 x 6% x 8/12) …………………
24,000
Interest Payable ……………………………………………….
24,000
Unearned Revenue ($24,000 x 4/6) …………………………
16,000
Service Revenue ………………………………………………
16,000
PA10–2 (continued)
Req. 3
Balance Sheet:
CURRENT LIABILITIES
Salaries and Wages Payable
$40,000
Interest Payable
24,000
Unearned Revenue
8,000
Note Payable
600,000
TOTAL CURRENT LIABILITIES
672,000
Req. 4
Transaction
Effect
Numerator
Denominator
April 30
Increased
Increased
Increased
June 6
Increased
Increased
Increased
July 15
Decreased
Decreased
Decreased
August 31
Increased
Increased
Increased
December 31
Increased
Increased
No Change
December 31
Increased
Increased
No Change
December 31
Decreased
Decreased
No Change