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*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
