SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 10-1
(a) A note payable due in two years is a long-term liability, not a current
liability.
(b) $30,000 of the mortgage payable is a current maturity of long–term debt.
BRIEF EXERCISE 10-2
July 1 Cash ………………………………………………………… 60,000
Dec. 31 Interest Expense ………………………………………. 3,000
BRIEF EXERCISE 10-3
Sales tax payable
Mar. 16 Cash ………………………………………………………… 16,380
BRIEF EXERCISE 10-4
Cash ……………………………………………………………………. 840,000
Unearned Ticket Revenue ……………………………………… 70,000
BRIEF EXERCISE 10-5
Gross earnings:
Regular pay (40 X $16) ……………………………………. $640.00
BRIEF EXERCISE 10-6
Jan. 15 Salaries and Wages Expense ……………………. 760.00
Jan. 15 Salaries and Wages Payable……………………… 606.86
BRIEF EXERCISE 10-7
Issue Stock
Issue Bond
Income before interest and taxes
Interest ($2,000,000 X 8%)
Income before income taxes
Income tax expense (30%)
Net income (a)
Outstanding shares (b)
Earnings per share (a) ÷ (b)
$700,000
0
700,000
210,000
$490,000
700,000
$0.70
$700,000
160,000
540,000
162,000
$378,000
500,000
$0.76
of stock that are outstanding.
BRIEF EXERCISE 10-8
(a) Jan. 1 Cash ………………………………………… 4,000,000
(b) July 1 Interest Expense ……………………….. 160,000
(c) Dec. 31 Interest Expense ……………………….. 160,000
BRIEF EXERCISE 10-9
(a) Jan. 1 Cash ($2,000,000 X .97) ……………… 1,940,000
(b) Jan. 1 Cash ($2,000,000 X 1.04) ……………. 2,080,000
BRIEF EXERCISE 10-10
2. July 1 Cash ($900,000 X 1.02) ………………. 918,000
3. Sept. 1 Cash ($400,000 X .98) ………………… 392,000
BRIEF EXERCISE 10-11
Bonds Payable ………………………………………………… 1,000,000
Loss on Bond Redemption
BRIEF EXERCISE 10-12
Semiannual
Interest
Period
(A)
Cash
Payment
(B)
Interest
Expense
(D) X 5%
(C)
Reduction
of Principal
(A) – (B)
(D)
Principal
Balance
(D) – (C)
Issue Date
1
$64,195
$40,000
$24,195
$800,000
775,805
Dec. 31 Cash ……………………………………………………. 800,000
June 30 Interest Expense ………………………………….. 40,000
BRIEF EXERCISE 10-13
Long-term liabilities
Bonds payable, due 2017 ……………………………….. $600,000
*BRIEF EXERCISE 10-14
*BRIEF EXERCISE 10-15
(a) Interest Expense ……………………………………………. 46,884
(b) Interest expense is greater than interest paid because the bonds sold
(c) Interest expense increases each period because the bond carrying value
*BRIEF EXERCISE 10-16
(a) Jan. 1 Cash (.96 X $5,000,000) ……………… 4,800,000
(b) July 1 Interest Expense ……………………….. 235,000
*BRIEF EXERCISE 10-17
(a) Jan. 1 Cash (1.02 X $4,000,000) ……………. 4,080,000
(b) July 1 Interest Expense ……………………….. 192,000
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 10-1
1. $70,000 X 6% X 5/12 = $1,750
DO IT! 10-2
(a) Salaries and Wages Expense …………………………. 74,000
FICA Taxes Payable ………………………………… 5,661
(To record February 28 payroll)
(b) Payroll Tax Expense ………………………………………. 5,931
FICA Taxes Payable ………………………………… 5,661
DO IT! 10-3
DO IT! 10-4
(a) Cash ……………………………………………………………… 520,000
(b) Long-term liabilities
Bonds payable ………………………………………… $500,000
DO IT! 10-5
Loss on Bond Redemption ……………………………………. 6,000
(To record redemption of bonds at 99)
DO IT! 10-6
Cash ……………………………………………………………………. 700,000
Interest Expense …………………………………………………… 21,000*
(To record semiannual payment on mortgage)
SOLUTIONS TO EXERCISES
EXERCISE 10-1
July 1, 2015
Cash ……………………………………………………………. 50,000
November 1, 2015
Cash ……………………………………………………………. 60,000
December 31, 2015
Interest Expense
($50,000 X 8% X 6/12) ………………………………… 2,000
Interest Expense
($60,000 X 6% X 2/12) ………………………………… 600
Feburary 1, 2016
Notes Payable………………………………………………. 60,000
April 1, 2016
Notes Payable………………………………………………. 50,000
EXERCISE 10-2
(a) June 1 Cash …………………………………………………. 90,000
(b) June 30 Interest Expense …………………………..…… 600
Interest Payable
(c) Dec. 1 Notes Payable …………………………………… 90,000
(d) $3,600
EXERCISE 10-3
POOLE COMPANY
Apr. 10 Cash ……………………………………………………… 31,500
WATERMAN COMPANY
15 Cash ……………………………………………………… 25,680