Exercise 14–19
1. January 1, 2018
Cash ………………………………………………………………………..
2. Amortization schedule
Cash Effective Decrease in Outstanding
Dec.31 Payment Interest Balance Balance
6% x Outstanding Balance Balance Reduction
* rounded.
3. December 31, 2018
Notes receivable (difference)……………………………………..
Interest revenue (6% x outstanding balance)……………………….
4. December 31, 2020
Notes receivable (difference)……………………………………..
Interest revenue (6% x outstanding balance)
Exercise 14–20
1. January 1, 2018
Notes payable…………………………………………………………
2. Amortization schedule
Cash Effective Decrease in Outstanding
Dec.31 Payment Interest Balance Balance
10% x Outstanding Balance Balance Reduction
4,000,000
* rounded.
3. December 31, 2018
Cash (payment determined above)………………………………….
4. December 31, 2020
Cash (payment determined above)………………………………….
Exercise 14–21
1. November 1, 2018
2. November 30, 2018
Calculation of installment payment:
amount (from Table 4)
of loan n = 12, i = 1%
3. December 31, 2018
Journal entry (not required):
Cash (payment determined above)………………………………….
The FASB Accounting Standards Codification represents the
single source of authoritative U.S. generally accepted accounting principles. The
specific citation for each of the following items is:
1. Disclosure requirements for maturities of long-term debt:
2. How to estimate the value of a note when a note having no ready market
and no interest rate is exchanged for a noncash asset without a readily
available fair value:
3. When the straight-line method can be used as an alternative to the interest
method of determining interest:
Exercise 14–22
Exercise 14–23
Bonds payable (face amount)……………………………….. 90,000,000
Exercise 14–24
Requirement 1
Gless (Issuer)
Cash (101% x $12 million)……………………………………. 12,120,000
Convertible bonds payable (face amount)……………
Requirement 2
Gless (Issuer)
Century (Investor)
[Using the straight-line method, each interest entry is the same.]
Requirement 3
Gless (Issuer)
Convertible bonds payable (10% of the account balance) 1,200,000
Premium on bonds payable
Century (Investor)
Exercise 14–25
Under US GAAP, the entire issue price of convertible debt is recorded as debt:
……………………Convertible bonds payable (face amount)
……………………..Premium on bonds payable (difference)
Under IFRS, convertible debt is divided into its liability and equity elements. We
achieve separation by measuring the fair value of a similar liability that does not
………………………………………………….Bonds payable (99% x $12 million)
………………………..Equity—conversion option (to balance)
bonds payable. This is the “net method.” By the gross method, the entry would
be:
Cash (101% x $12 million)………………………………………… 12,120,000
Exercise 14–26
Requirement 1
Requirement 2
Requirement 3
Interest expense ($1,200,000 – 40,000)……………………….. 1,160,000
Premium on bonds payable ($800,000 ÷ 20)…………… 40,000