aPresent value of $1 for 19 periods at 3.1%.
Bonds Payable (
Bonds Payable (
bPresent value of an annuity for 19 periods at
3.1%.
Solutions11-0
11.23 a. continued.
December 31, 2013:
b. First Six Months of 2013
Debt Service Payment: 0.03 X $10,000,000 = $300,000.
c. Second Six Months of 2013
Debt Service
Payment:
11.24 (Restin Corporation; accounting for bonds using the fair value option
based on the current market interest rate.) (amounts in US$)
a. January 1, 2014:
June 30, 2014:
December 31, 2014:
b. First Six Months
c. Second Six Months
Debt Service Payment: 0.04 X $20,000,000 = $800,000.
Solutions11-12
11.25 (Boeing and United Airlines; applying the capital lease criteria
under the current/old rules.) (amounts in US$)
a. This lease is a capital lease because the lease period of 20 years
exceeds
b. This lease is a capital lease because the present value of the
c. The lease is not a capital lease. The present value of the
required lease payments of $36.9 million (= $5.5 million X
6.71008) is less than $54 million (= 90% of the fair value of the
d. This lease is not a capital lease. The present value of the
minimum required lease payments is $50.9 million (= $6.2
11.26 (Boeing and United Airlines; applying the new/current rules for
leases.) (amounts in US$)
a. The present value of the lease payments when discounted at
10% is
b. The present value of the lease payments is $54.8 million (=
11-13Solutions
11.26 continued.
c. The present value of the required lease payments of $36.9
million (=
d. The present value of the minimum required lease payments is
11.27 (Sun Microsystems; preparing lessor’s journal entries for an
operating lease and a capital lease.) (amounts in US$)
a. This lease is a capital lease under the current/old rules. The life
b. Beginning of Each Year
End of Each
Year
c. January 1, 2013
Solutions11-14
11.27 c. continued.
December 31,
2013
January 1,
2014
December 31,
2014
January 1,
2015
Cash………………………………………………………………..
11.28 (Baldwin Products; preparing lessee’s journal entries for an operating
lease and a capital lease.) (amounts in US$)
a. This lease does not satisfy any of the criteria for a capital lease
under the current/old rules, so it is an operating lease under
11.28 continued.
b. December 31 of Each Year
c. January 2, 2013
Leased A
ss
et …………………………………………………… 25,771
December 31, 2013
December 31, 2014
Solutions11-16
11.28 c. continued.
December 31, 2015
d. Operating Lease Method: Rent Expense (= $10,000 X 3)…. $
11.29 (Aggarwal Corporation; accounting for long-term bonds.) (amounts
in
US
$)
a. Interest Expense
b. Carrying Value of Bonds on December 31, 2012
Interest:
11-17Solutions
c. Carrying Value of Bonds on July 1, 2013
Carrying Value of Bonds, December 31, 2012
Carrying Value of Bonds, July 1,
$
Carrying Value of One-Half of
Carrying Value of Bonds, July 1,
$
Carrying Value of One-Half of
$
c. $28 million = 0.07 X $400 million.
Solutions11-18
11.30 continued.
d. $101.4 million. Ask, first, what must the carrying value of the
notes be at the end of 2031. Then, compute interest for the year
e. The carrying value of the $700 million face value of zero coupon
bonds is $391 million (= $700 X 0.55839; see Table 2, 6%
December 31,
2022
11.31 (Understanding and using bond tables.)
a. The coupon rate on these bonds of 8% compounded
semiannually equals the historical market interest rate of 8%
b. The coupon rate on these bonds is 8% compounded
s
em
i
a
nnu
a
ll
y
.
11-19Solutions
11.31 continued.
c. Firms amortize any initial issue premium as a reduction in
interest expense and a reduction in the bond liability over the life
d. $1,000,000 X 111.7278% = $1,117,278. Note that the rows
$1,106,775.
f. Cash Payment for Debt
Ser
v
ic
e …………………………………… $
80,000
bPresent value of an annuity for 19 periods at
3.1%.
Solutions11-0
11.23 a. continued.
December 31, 2013:
b. First Six Months of 2013
Debt Service Payment: 0.03 X $10,000,000 = $300,000.
c. Second Six Months of 2013
Debt Service
Payment:
11.24 (Restin Corporation; accounting for bonds using the fair value option
based on the current market interest rate.) (amounts in US$)
a. January 1, 2014:
June 30, 2014:
December 31, 2014:
b. First Six Months
c. Second Six Months
Debt Service Payment: 0.04 X $20,000,000 = $800,000.
Solutions11-12
11.25 (Boeing and United Airlines; applying the capital lease criteria
under the current/old rules.) (amounts in US$)
a. This lease is a capital lease because the lease period of 20 years
exceeds
b. This lease is a capital lease because the present value of the
c. The lease is not a capital lease. The present value of the
required lease payments of $36.9 million (= $5.5 million X
6.71008) is less than $54 million (= 90% of the fair value of the
d. This lease is not a capital lease. The present value of the
minimum required lease payments is $50.9 million (= $6.2
11.26 (Boeing and United Airlines; applying the new/current rules for
leases.) (amounts in US$)
a. The present value of the lease payments when discounted at
10% is
b. The present value of the lease payments is $54.8 million (=
11-13Solutions
11.26 continued.
c. The present value of the required lease payments of $36.9
million (=
d. The present value of the minimum required lease payments is
11.27 (Sun Microsystems; preparing lessor’s journal entries for an
operating lease and a capital lease.) (amounts in US$)
a. This lease is a capital lease under the current/old rules. The life
b. Beginning of Each Year
End of Each
Year
c. January 1, 2013
Solutions11-14
11.27 c. continued.
December 31,
2013
January 1,
2014
December 31,
2014
January 1,
2015
Cash………………………………………………………………..
11.28 (Baldwin Products; preparing lessee’s journal entries for an operating
lease and a capital lease.) (amounts in US$)
a. This lease does not satisfy any of the criteria for a capital lease
under the current/old rules, so it is an operating lease under
11.28 continued.
b. December 31 of Each Year
c. January 2, 2013
Leased A
ss
et …………………………………………………… 25,771
December 31, 2013
December 31, 2014
Solutions11-16
11.28 c. continued.
December 31, 2015
d. Operating Lease Method: Rent Expense (= $10,000 X 3)…. $
11.29 (Aggarwal Corporation; accounting for long-term bonds.) (amounts
in
US
$)
a. Interest Expense
b. Carrying Value of Bonds on December 31, 2012
Interest:
11-17Solutions
c. Carrying Value of Bonds on July 1, 2013
Carrying Value of Bonds, December 31, 2012
$
c. $28 million = 0.07 X $400 million.
Solutions11-18
11.30 continued.
d. $101.4 million. Ask, first, what must the carrying value of the
notes be at the end of 2031. Then, compute interest for the year
e. The carrying value of the $700 million face value of zero coupon
bonds is $391 million (= $700 X 0.55839; see Table 2, 6%
December 31,
2022
11.31 (Understanding and using bond tables.)
a. The coupon rate on these bonds of 8% compounded
semiannually equals the historical market interest rate of 8%
b. The coupon rate on these bonds is 8% compounded
s
em
i
a
nnu
a
ll
y
.
11-19Solutions
11.31 continued.
c. Firms amortize any initial issue premium as a reduction in
interest expense and a reduction in the bond liability over the life
d. $1,000,000 X 111.7278% = $1,117,278. Note that the rows
$1,106,775.
f. Cash Payment for Debt
Ser
v
ic
e …………………………………… $
80,000