*EXERCISE 10-20
(a) Jan. 1 Cash ($600,000 X 103%) …………………… 618,000
(b) July 1 Interest Expense ……………………………… 26,550
(c) Dec. 31 Interest Expense ……………………………. 26,550
2035
(d) Jan. 1 Bonds Payable ………………………………. 600,000
*EXERCISE 10-21
(a) 2014
Dec. 31 Cash ……………………………………………… 730,000
(b) 2015
June 30 Interest Expense ……………………………. 47,500
(c) 2015
Dec. 31 Interest Expense ……………………………. 47,500
(d) 2024
Dec. 31 Bonds Payable ………………………………. 800,000
SOLUTIONS TO PROBLEMS
PROBLEM 10–1A
(a) Jan. 5 Cash …………………………..……………………… 20,520
12 Unearned Service Revenue …………………. 10,000
14 Sales Taxes Payable …………………………... 7,700
20 Accounts Receivable ………………………….. 48,600
21 Cash …………………………..……………………… 27,000
25 Cash …………………………..……………………… 12,420
(b) Jan. 31 Interest Expense ………………………….. 60
PROBLEM 10-1A (Continued)
(c) Current liabilities
Notes payable …………………………………………………………. $27,000
Accounts payable …………………………………………………… 52,000
PROBLEM 10–2A
(a) Jan. 2 Inventory …………………………………………. 30,000
Feb. 1 Accounts Payable……………………………… 30,000
Mar. 31 Interest Expense
Apr. 1 Notes Payable …………………………………… 30,000
July 1 Equipment ………………………………………… 71,000
Sept. 30 Interest Expense
Oct. 1 Notes Payable …………………………………… 60,000
Dec. 1 Cash ………………………………………………… 24,000
Dec. 31 Interest Expense
($24,000 X 8% X 1/12) …………………….. 160
PROBLEM 10-2A (Continued)
(b)
Notes Payable
4/1 30,000
10/1 60,000
2/1 30,000
7/1 60,000
12/1 24,000
12/31 Bal. 24,000
Interest Payable
4/1 450
10/1 1,500
3/31 450
9/30 1,500
12/31 160
12/31 Bal. 160
Interest Expense
3/31 450
9/30 1,500
12/31 160
12/31 Bal. 2,110
(c) Current liabilities
PROBLEM 10-3A
(a) 2015
May 1 Cash …………………………………………….. 600,000
(b) Dec. 31 Interest Expense …………………………... 9,000
(c) Current Liabilities
Long-term Liabilities
(d) 2016
May 1 Interest Payable ……………………………. 9,000
(e) Nov. 1 Interest Expense …………………………... 27,000
(f) Nov. 1 Bonds Payable ……………………………… 600,000
PROBLEM 10-4A
(a) 2015
Jan. 1 Cash ($750,000 X 1.04) ………………… 780,000
(b) Current Liabilities
Interest payable
Long-term Liabilities
(c) 2017
Jan. 1 Bonds Payable ……………………………. 750,000**
PROBLEM 10-5A
(a)
Semiannual
Interest Period
Cash
Payment
Interest
Expense
Reduction of
Principal
Principal
Balance
Issue Date
1
2
3
4
$29,433
29,433
29,433
29,433
$16,000
15,463
14,904
14,323
$13,433
13,970
14,529
15,110
$400,000
386,567
372,597
358,068
342,958
(b) 2014
Dec. 31 Cash …………………………..…………………. 400,000
2015
June 30 Interest Expense …………………………….. 16,000
Dec. 31 Interest Expense …………………………….. 15,463
(c) 12/31/15
Current Liabilities
Long-term Liabilities
*PROBLEM 10-6A
(a) 2015
July 1 Cash …………………………………………. 2,271,813
(b) FLANAGIN CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments
10% Bonds Issued at 8%
Semi–
annual
Interest
Periods
(A)
Interest
to Be
Paid
(B)
Interest
Expense
(C)
Premium
Amor-
tization
(A) – (B)
(D)
Unamor-
tized
Premium
(D) – (C)
(E)
Bond
Carrying
Value
($2,000,000 + D)
Issue date
1
2
3
$100,000
100,000
100,000
$90,873
90,507
90,128
$9,127
9,493
9,872
$271,813
262,686
253,193
243,321
$2,271,813
2,262,686
2,253,193
2,243,321
(c) Dec. 31 Interest Expense
(d) 2016
July 1 Interest Expense
[($2,271,813 – $9,127) X 4%] …. 90,507
(e) Dec. 31 Interest Expense
*PROBLEM 10-7A
(a) (1) 2015
July 1 Cash ……………………………………… 4,376,892
(2) Dec. 31 Interest Expense
(3) 2016
July 1 Interest Expense
(4) Dec. 31 Interest Expense
(b) Bonds payable …………………………………………….. $5,000,000