Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
689
Problem 10–10AB (45 minutes)
Part 1
Ten payments of $8,125* ……………..
$ 81,250
Less premium ……………………………..
(5,333)
Part 2
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[3.25% x $250,000]
(B)
Bond Interest
Expense
[3% x Prior (E)]
(C)
Premium
Amortization
[(A) – (B)]
(D)
Unamortized
Premium
[Prior (D) – (C)]
(E)
Carrying
Value
[$250,000 + (D)]
1/01/2021
$5,333
$255,333
6/30/2021
$ 8,125
$ 7,660
$ 465
4,868
254,868
12/31/2021
8,125
7,646
479
4,389
254,389
6/30/2022
3,896
3,388
6/30/2023
2,865
12/31/2023
8,125
7,586
539
2,326
252,326
6/30/2024
1,771
6/30/2025
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
690
Problem 10–10AB (Concluded)
Part 3
2021
June 30
Bond Interest Expense …………………………
7,660
Premium on Bonds Payable………………….
2021
Dec. 31
Bond Interest Expense …………………………
7,646
Premium on Bonds Payable………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
691
Problem 10-11AB (60 minutes)
Part 1
Jan. 1
Cash ………………………………………………….
184,566
Part 2
Six payments of $9,900* ………………
$ 59,400
Less premium ……………………………..
(4,566)
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[5.5% x $180,000]
(B)
Bond Interest
Expense
[5% x Prior (E)]
(C)
Premium
Amortization
[(A) – (B)]
(D)
Unamortized
Premium
[Prior (D) – (C)]
(E)
Carrying
Value
[$180,000 + (D)]
1/01/2021
$4,566
$184,566
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
Problem 10-11AB (Concluded)
Part 4
June 30
Bond Interest Expense ……………………….
9,228
Premium on Bonds Payable………………..
672
9,900
9,900
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
693
Problem 10-12AC (35 minutes)
Part 1
Year 1
Jan. 1
Right–of-Use Asset …………………………………………..
51,000
Lease Liability …………………………………………….
51,000
Record right-of-use asset and lease liability.
Jan. 1
18,000
Cash …………………………………………………………..
18,000
Record beginning-year cash lease payment.
Part 3
Year 1 and Year 2 and Year 3
Dec. 31
Amortization Expense ………………………………………
17,000
Accum. Amortization—Right-of-Use Asset ….
17,000
Record amortization on right-of-use asset.
($51,000 – $0) / 3 years
Part 4
Dec. 31
Interest Expense ……………………………………………..
16,019
Cash ………………………………………………………….
Dec. 31
Interest Expense ……………………………………………..
16,981
Cash ………………………………………………………….
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
694
Problem 10-13AC (35 minutes)
Part 1
Year 1
Jan. 1
Right–of-Use Asset …………………………………………..
51,000
Lease Liability …………………………………………….
51,000
Record right-of-use asset and lease liability.
Jan. 1
Lease Liability ………………………………………………….
18,000
Cash …………………………………………………………..
18,000
Part 3
Year 1
Dec. 31
Amortization Expense ………………………………………
16,019
Accum. Amortization—Right-of-Use Asset ….
16,019
Record amortization on right-of-use asset.1
Year 2
Dec. 31
Amortization Expense ………………………………………
16,981
Accum. Amortization—Right-of-Use Asset ….
16,981
Record amortization on right-of-use asset.2
Dec. 31
Amortization Expense ………………………………………
18,000
Accum. Amortization—Right-of-Use Asset ….
18,000
Record amortization on right-of-use asset.3
Dec. 31
Interest Expense ……………………………………………..
1,981
Lease Liability …………………………………………………
16,019
Cash ………………………………………………………….
18,000
Year 2
Dec. 31
Interest Expense ……………………………………………..
1,019
Lease Liability …………………………………………………
16,981
Cash ………………………………………………………….
18,000
Record lease payment for interest and lease liability.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
695
PROBLEM SET B
Problem 10-1B (40 minutes)
Part 1
Jan. 1
Cash …………………………………………………..
3,010,000
Part 2
[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout
the bonds’ life because the company uses straight-line amortization.]
Part 3
Twenty payments of $170,000 ……..
$3,400,000
Plus discount ………………………………
390,000
Total bond interest expense ………..
$3,790,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
696
Problem 10-1B (Concluded)
Part 4 (Semiannual amortization: $390,000/20 = $19,500)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2021 …………….
$390,000
$3,010,000
6/30/2021 …………….
312,000
Part 5
June 30
Bond Interest Expense ………………………..
189,500
Discount on Bonds Payable……………
19,500
Cash ……………………………………………..
Dec. 31
Bond Interest Expense ………………………..
189,500
Discount on Bonds Payable……………
19,500
Cash ……………………………………………..
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
697
Problem 10-2B (40 minutes)
Part 1
Jan. 1
Cash ………………………………………………….
4,192,932
Part 2
(a) Cash Payment = $3,400,000 x 10% x 6/12 year = $170,000
Part 3
Twenty payments of $170,000 ………
$3,400,000
Less premium ……………………………..
(792,932)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
698
Problem 10-2B (Concluded)
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2021 ……….
$792,932
$4,192,932
713,638
634,344
Part 5
June 30
Bond Interest Expense
…………………………..……………………………..
…………………………..……………………………..
130,353
Premium on Bonds Payable………………..
Premium on Bonds Payable………………..
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
699
Problem 10-3B (45 minutes)
Part 1
Ten payments of $14,400* ……………
$ 144,000
Less premium ……………………………..
(12,988)
Total bond interest expense ………..
$ 131,012
Part 2
Straight-line amortization table ($12,988/10 = $1,299**)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2021
$12,988
$332,988
6/30/2021
11,689
331,689
12/31/2021
10,390
330,390
6/30/2022
329,091
327,792
325,194
6/30/2024
323,895
6/30/2025
1,299*
321,299
320,000
700
Problem 10-3B (Concluded)
Part 3
June 30
Bond Interest Expense
…………………………..……………………………..
…………………………..……………………………..
13,101
Dec. 31
Bond Interest Expense
…………………………..……………………………..
…………………………..……………………………..
13,101
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
701
Problem 10-4B (60 minutes)
Part 1
Jan. 1
Cash ………………………………………………….
198,494
Part 2
Thirty payments of $7,200* …………..
$ 216,000
Plus discount ………………………………
41,506
Total bond interest expense ………..
$ 257,506
Part 3 Straight-line amortization table ($41,506/30= $1,384)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2021
$41,506
$ 198,494
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
Problem 10-4B (Concluded)
Part 4
June 30
Bond Interest Expense ……………………….
8,584
Discount on Bonds Payable…………..
1,384
Cash …………………………………………….
7,200
Discount on Bonds Payable…………..
1,384
Cash …………………………………………….
7,200
Part 5
If the market interest rate on the issue date had been 4% instead of 8%, the
bonds would have sold at a premium because the contract rate of 6% would
have been greater than the market rate.
This change would affect the balance sheet because the bond liability would
be larger (par value plus a premium instead of par value minus a discount).
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
Problem 10-5B (45 minutes)
Background: Amount of Payment (given in the problem)
Note balance
$150,000
Number of periods
Interest rate
Value from Table B.3
Part 1
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[10% x (A)]
+
(C)
Debit
Notes
Payable
[(D) – (B)]
=
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) – (C)]
12/31/2021 ..
$150,000
$15,000
$ 45,316
$ 60,316
$104,684
12/31/2023 ..
Part 2
2021
Jan. 1
Cash ……………………………………………………………
150,000
Notes Payable …………………………………………
150,000
Borrowed $150,000 by signing a 10%
installment note.
Dec. 31
Interest Expense ………………………………………….
Notes Payable ………………………………………………
Cash ………………………………………………………
Record first installment payment.
Dec. 31
Interest Expense ………………………………………….
Notes Payable ………………………………………………
Cash ………………………………………………………
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
704
Problem 10–6B (30 minutes)
2. Amortization table for the loan
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[5% x (A)]
+
(C)
Debit
Notes
Payable
[(D) – (B)]
=
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) – (C)]
Dec. 31, Year 1
$130,000
$ 6,500
$ 30,161
$ 36,661
$99,839
3.
a.
Jan. 1
Cash …………………………………………………..
130,000
Notes Payable ………………………………..
130,000
Issued notes for cash.
Dec. 31
Interest Expense …………………………………
Notes Payable ……………………………………..
Cash ……………………………………………..
Record first installment payment.
Dec. 31
Interest Expense …………………………………
Notes Payable ……………………………………..
Record last installment payment.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
Problem 10-7B (30 minutes)
Part 1
Atlas Company
Bryan Company
Part 2
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
706
Problem 10-8BA (50 minutes)
Part 1
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.6139
$90,000
$55,251
Interest (annuity) ….
B.3
7.7217
b.
Jan. 1
Cash …………………………………………………..
96,948
Premium on Bonds Payable……………
6,948
Bonds Payable ………………………………
90,000
Sold bonds on stated issue date.
Part 2
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.5584
$90,000
$50,256
Interest (annuity) ….
B.3
7.3601
b.
Jan. 1
Cash …………………………………………………..
90,000
Bonds Payable ………………………………
90,000
Sold bonds on stated issue date.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 10
707
Problem 10-8BA (Concluded)
Part 3
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.5083
$90,000
$45,747
B.3
7.0236
$83,674
market rate) and 10 periods (semiannual payments).
b.
Jan. 1
Cash …………………………………………………..
83,674
90,000