*PROBLEM 10-7A (Continued)
(c) Dear :
by Kellerman Company.
(2) When the bonds are sold at a discount, the effective-interest method
will result in less interest expense reported than the straight-line
(3) The total cost of borrowing is $4,623,108 as shown below:
Semiannual interest payments
under either method of amortization.
Sincerely,
*PROBLEM 10-8A
(a) 2015
Jan. 1 Cash ($3,000,000 X 1.04) ……………… 3,120,000
(b) See page 10-43.
(c) 2015
July 1 Interest Expense …………………………. 144,000
Dec. 31 Interest Expense …………………………. 144,000
2016
Jan. 1 Interest Payable ………………………….. 150,000
July 1 Interest Expense …………………………. 144,000
Dec. 31 Interest Expense …………………………. 144,000
(d) Current Liabilities
Long-term Liabilities
Bonds payable, due 2025 ……………………… $3,000,000
*PROBLEM 10-8A (Continued)
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 10–43
(b)
Semiannual
Interest
Periods
(A)
Interest to
Be Paid
(5% X $3,000,000)
(B)
Interest Expense
to Be Recorded
(A) – (C)
(C)
Premium
Amortization
($120,000 ÷ 20)
(D)
Unamortized
Premium
(D) – (C)
(E)
Bond
Carrying Value
[$3,000,000 + (D)]
Issue date
1
2
3
4
$150,000
150,000
150,000
150,000
$144,000
144,000
144,000
144,000
$6,000
6,000
6,000
6,000
$120,000
114,000
108,000
102,000
96,000
$3,120,000
3,114,000
3,108,000
3,102,000
3,096,000
*PROBLEM 10-9A
(a) 2015
July 1 Cash ($3,500,000 X 104%) …………… 3,640,000
Dec. 31 Interest Expense ………………………… 133,000
Premium on Bonds Payable
(b) 2015
July 1 Cash ($3,500,000 X 98%) …………….. 3,430,000
Dec. 31 Interest Expense ………………………… 143,500
Discount on Bonds
(c) Premium
Current Liabilities
Long-term Liabilities
Discount
Current Liabilities
Long-term Liabilities
*PROBLEM 10-10A
(a) 2016
Jan. 1 Interest Payable ………………………… 105,000**
(b) July 1 Interest Expense ……………………….. 95,000**
(c) July 1 Bonds Payable ………………………….. 1,200,000**
Premium on Bonds Payable ………. 76,000**
(d) Dec. 31 Interest Expense ……………………….. 57,000**
$114,000
19
PROBLEM 10–1B
(a) Jan. 1 Cash ……………………………………………………. 30,000
5 Cash ……………………………………………………. 11,130
14 Sales Taxes Payable …………………………….. 5,000
20 Accounts Receivable ……………………………. 34,980
25 Cash …………………………..……………………….. 16,536
(b) Jan. 31 Interest Expense ……………………………. 150
(c) Current liabilities
Notes payable …………………………………………………… $30,000
PROBLEM 10-2B
(a) 2015
June 1 Cash ………………………………………….. 2,000,000
(b) Dec. 31 Interest Expense …………………………. 15,000
(c) Current Liabilities
Long-term Liabilities
(d) 2016
June 1 Interest Payable ………………………….. 15,000
(e) Dec. 1 Interest Expense …………………………. 90,000
(f) Dec. 1 Bonds Payable …………………………….
2,000,000
PROBLEM 10-3B
(a) 2015
Jan. 1 Cash ($800,000 X 1.05) ………………….. 840,000
(b) Current Liabilities
Long-term Liabilities
(c) 2017
Jan. 1 Bonds Payable ……………………………… $800,000
PROBLEM 10-4B
(a)
Semiannual
Interest Period
Cash
Payment
Interest
Expense
Reduction
of Principal
Principal
Balance
Issue Date
1
2
3
4
$44,149
44,149
44,149
44,149
$24,000
23,194
22,356
21,484
$20,149
20,955
21,793
22,665
$600,000
579,851
558,896
537,103
514,438
(b) 2015
Dec. 31 Cash …………………………………………….. 600,000
2016
June 30 Interest Expense …………………………... 24,000
Dec. 31 Interest Expense …………………………... 23,194
(c) 12/31/16
Current Liabilities
*PROBLEM 10-5B
(a) 2015
July 1 Cash …………………………………………. 4,219,600
(b) WITHERSPOON SATELLITES
Bond Discount Amortization
Effective-Interest Method—Semiannual Interest Payments
9% Bonds Issued at 10%
Semi–
annual
Interest
Periods
(A)
Interest
to Be
Paid
(B)
Interest
Expense
to Be
Recorded
(C)
Discount
Amor-
tization
(B) – (A)
(D)
Unamor-
tized
Discount
(D) – (C)
(E)
Bond
Carrying
Value
($4,500,000 – D)
Issue date
1
2
3
$202,500
202,500
202,500
$210,980
211,404
211,849
$8,480
8,904
9,349
$280,400
271,920
263,016
253,667
$4,219,600
4,228,080
4,236,984
4,246,333
(c) Dec. 31 Interest Expense
($4,219,600 X 5%) ………………… 210,980
(d) 2016
July 1 Interest Expense
(e) Dec. 31 Interest Expense