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*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
