EXERCISE 10-10
(a) Jan. 1 Cash ($600,000
× 1.03) ………………………. 618,000
Bonds Payable …………………………… 600,000
EXERCISE 10-11
(a) Jan. 1 Cash ($500,000
× .96) ……………………… 480,000
EXERCISE 10-12
(a) The General Electric bonds were issued at a premium and the Boeing
bonds were issued at a discount.
(b) The prices of the two bonds differed because bond price is based on the
EXERCISE 10-13
2014
(a) Jan. 1 Cash ……………………………………………….. 350,000
Bonds Payable …………………………. 350,000
EXERCISE 10-14
(a) April 30 Bonds Payable ……………………………….. 140,000
Loss on Bond Redemption ……………… 14,900*
Cash ($140,000 X 101%) …………… 141,400
EXERCISE 10-15
(a) Account Classification Reason
Accounts payable Current liability Due within one year
Accrued pension liability Long-term liability Relates to pensions. Not due
within one year
EXERCISE 10-15 (Continued)
(b) SANTANA INC.
Balance Sheet (Partial)
January 31, 2014
(in thousands)
Current liabilities
Notes payable ……………………………………… $2,563.6
Accounts payable ……………………………….. 4,263.9
EXERCISE 10-16
(a) 1. Working capital = $3,416.3 – $2,988.7 = $427.6
2. Current ratio = $3,416.3 ÷ $2,988.7 = 1.14:1
EXERCISE 10-16 (Continued)
(b) Debt to assets ratio, adjusted for off-balance-sheet lease obligations.
EXERCISE 10-17
(a) Current ratio
2014 $10,795 ÷ $4,897 = 2.20:1
EXERCISE 10-18
(a) Current ratio
(b) Current ratio
(c) The liquidity ratios would not change but having access to a line of
EXERCISE 10-19
(a) The company does not have to record these contingent liabilities
because they have determined that they are not likely to occur and the
impact would be immaterial in any event.
*EXERCISE 10-20
2014
(a) Jan. 1 Cash ($500,000 X 103%) ………………….. 515,000
Bonds Payable ………………………… 500,000
Premium on Bonds Payable ……… 15,000
*EXERCISE 10-21
2013
(a) Dec. 31 Cash ……………………………………………… 288,000
Discount on Bonds Payable ……………. 12,000
Bonds Payable ………………………… 300,000
*EXERCISE 10-22
2014
(a) Jan. 1 Cash ……………………………………………….. 360,727
Discount on Bonds Payable …………….. 39,273
Bonds Payable …………………………. 400,000
10-28
10-28 Copyright © 2013 John Wiley & Sons, Inc. Kimmel, Financial Accounting, 7/e, Solutions Manual (For Instructor Use Only)
*EXERCISE 10-23
2014
(a) Jan. 1 Cash ……………………………………………….. 407,968
Bonds Payable …………………………. 380,000
Premium on Bonds Payable ……… 27,968
10-30 Copyright © 2013 John Wiley & Sons, Inc. Kimmel, Financial Accounting, 7/e, Solutions Manual (For Instructor Use Only)
*EXERCISE 10-24
Issuance of Note
2014 Dec. 31 Cash …………………………………………. 280,000
Mortgage Payable ………………. 280,000
(A) (B) (C) (D)
Semiannual Interest Reduction Principal
Interest Cash Expense of Principal Balance
*EXERCISE 10-25
Annual
Interest
Period
(A)
Cash
Payment
(B)
Interest
Expense
(D) X 10%
(C)
Reduction
of Principal
(A) – (B)
(D)
Principal
Balance
(D) – (C)
GOINS CORPORATION
Balance Sheet (Partial)
December 31, 2014
SOLUTIONS TO PROBLEMS
PROBLEM 10-1A
(a) Jan. 1 Cash ………………………………………………….. 18,000
Notes Payable …………………………….. 18,000
5 Cash ………………………………………………….. 6,254
Sales Revenue ($6,254 ÷ 1.06) ……… 5,900
Sales Taxes Payable
(b) Jan. 31 Interest Expense ………………………………… 75
Interest Payable
($18,000 X 5% X 1/12) ……………….. 75
PROBLEM 10-1A (Continued)
(c) Current liabilities
Notes payable ……………………………………………………….. $ 18,000*
Accounts payable ………………………………………………….. 42,500*
PROBLEM 10-2A
(a) Sept. 1 Inventory ……………………………………………. 12,000
Notes Payable ……………………………… 12,000
30 Interest Expense
($12,000 X .06 X 1/12) ………………………. 60
Interest Payable …………………………… 60
Oct. 1 Equipment …………………………………………. 16,500
Notes Payable ……………………………… 16,500
(b)
Notes Payable
12/1 12,000 9/1 12,000
10/1 16,500
Interest Payable
12/1 180 9/30 60
10/31 170
PROBLEM 10-2A (Continued)
Interest Expense
9/30 60
10/31 170
(c) Current liabilities
Notes payable ……………………………………………………………. 42,500
PROBLEM 10-3A
(a) Jan. 1 Interest Payable …………………………… 40,000
Cash …………………………………….. 40,000**
PROBLEM 10-4A
2013
(a) Oct. 1 Cash …………………………………………… 700,000
Bonds Payable …………………….. 700,000
2014
(d) Oct. 1 Interest Expense
($700,000 X 5% X 9/12) ……………… 26,250
Interest Payable ………………………….. 8,750
PROBLEM 10-5A
2014
(a) Jan. 1 Cash ($6,000,000 X 98%) ……………. 5,880,000
Discount on Bonds Payable ………. 120,000
PROBLEM 10-6A
(a)
2014 2013
1. Current ratio $2,893 ÷ $2,806
$4,443 ÷ $4,836
(b) The company’s position as measured through all ratios except the
current ratio has deteriorated. Southwest appears to be much less liquid
and solvent when comparing 2014 to 2013.