Exercise 14–3
1. Price of the bonds at January 1, 2018
2. January 1, 2018
3. June 30, 2018
Partial amortization schedule (not required)
Cash Effective Increase in Outstanding
Payment Interest Balance Balance
5% x Face Amount 6% x Outstanding Balance Discount Reduction
70,823,680
4. December 31, 2018
Exercise 14–4
1. January 1, 2018
¥ 5% x $80,000,000
*Present value of an ordinary annuity of $1: n = 20, i = 6% (Table 4)
** Present value of $1: n = 20, i = 6% (Table 2)
2. June 30, 2018
3. December 31, 2018
Exercise 14–5
1. Liability at December 31, 2018
Bonds payable (face amount)……………………………….. $320,000,000
Less: discount………………………………………………….. 36 ,705,280
2. Interest expense for year ended December 31, 2018
3. Statement of cash flows for year ended December 31, 2018
Exercise 14–5 (concluded)
Calculations:
January 1, 2018***
June 30, 2018*
December 31, 2018**
Exercise 14–6
1. June 30, 2018
Cash (price given)………………………………………………. 967,707
2. December 31, 2018
Exercise 14–7
1. Price of the bonds at January 1, 2018
Interest $7,500,000¥x 13.76483 * = $103,236,225
¥5% x $150,000,000
2. January 1, 2018
Cash (price determined above)………………………….. 129,352,725
3. June 30, 2018
Interest expense ($7,500,000 + 688,243)…………………….. 8,188,243
4. December 31, 2025
Interest expense ($7,500,000 + 688,243)…………………….. 8,188,243
[Using the straight-line method, each interest entry is the same.]
Exercise 14–8
1. January 1, 2018
Interest $7,500,000¥x 13.76483 * = $103,236,225
¥ 5% x $150,000,000
*Present value of an ordinary annuity of $1: n = 30, i = 6% (Table 4)
** Present value of $1: n = 30, i = 6% (Table 2)
Bond investment (face amount)………………………… 150,000,000
2. June 30, 2018
Cash (5% x $150,000,000)…………………………………….. 7,500,000
3. December 31, 2025
Cash (5% x $150,000,000)…………………………………….. 7,500,000
[Using the straight-line method, each interest entry is the same.]
Exercise 14–9
1. Price of the bonds at January 1, 2018
Interest $18,000¥x 6.87396 * = $123,731
¥ 3% x $600,000
2. January 1, 2018
Cash (price determined above)……………………… 579,377
3. Amortization schedule
Cash Effective Increase in Outstanding
Payment Interest Balance Balance
3% x Face Amount 3.5% x Outstanding Balance Discount Reduction
579,377
1 18,000 .035 (579,377) = 20,278 2,278 581,655
2 18,000 .035 (581,655) = 20,358 2,358 584,013
*rounded
Exercise 14–9 (concluded)
4. June 30, 2018
Interest expense (3.5% x $579,377)………………… 20,278
December 31, 2018**
5. Liability at December 31, 2018
Bonds payable (face amount)……………………………….. $600,000
6. Interest expense for year ended December 31, 2018
June 30, 2018 interest expense…………………………… $20,278
7. December 31, 2021
* rounded value from amortization schedule
Exercise 14–10
1. Price of the bonds at January 1, 2018
Interest $22,500¥x 6.46321 * = $145,422
¥ 4.5% x $500,000
2. January 1, 2018
3. Amortization schedule
Cash Effective Increase in Outstanding
Payment Interest Balance Balance
4.5% x Face Amount 5% x Outstanding Balance Discount Reduction
483,842
1 22,500 .05 (483,842) = 24,192 1,692 485,534
2 22,500 .05 (485,534) = 24,277 1,777 487,311
* rounded.
Exercise 14–10 (concluded)
4. June 30, 2018
Interest expense (5% x $483,842)…………………… 24,192
5. December 31, 2021
* rounded value from amortization schedule
Air France (concluded)
Requirement 2
If AF had elected the FVO for all of its debt measured at amortized cost, the
fair value adjustment account would have a December 31, 2015, credit balance of