Problem 14–6 (continued)
December 31, 2016 (Western)
Interest expense ($1,200,000 + 80,000) …………………. 1,280,000
Discount on bonds payable ($20,000 x 4 months) 80,000
14–82 Intermediate Accounting, 8/e
Problem 14–6 (continued)
December 31, 2017 (Stillworth)
Interest receivable ($30,000 x 12% x 4/12)…………… 1,200
Discount on bond investment ($20 x 4 months) ….. 80
Problem 14–6 (concluded)
February 28, 2019 (Western)
Interest expense ($1,800,000 + 40,000 – 1,200,000) . 640,000
Interest payable (from adjusting entry) ………………. 1,200,000
Problem 14–7
Requirement 1
Interest $16,000,000¥ x 17.15909 * = $274,545,440
Principal $400,000,000 x 0.14205 ** = 56,820,000
Problem 14–8
1. Interest expense for year ended December 31, 2016
Dec. 31, 2016, interest expense (calculated below 1) . $4,422
2. Liabilities at December 31, 2016
Bonds payable (face amount) ………………………………. $500,000
14–86 Intermediate Accounting, 8/e
Problem 14–8 (concluded)
Calculations:
November 1, 2016
Cash (price: given) …………………………………… 442,215
Discount on bonds payable (difference) ……… 57,785 2
Problem 14–9
Requirement 1
Cash (price given) ………………………………………….. 5,795,518
Discount on bonds payable (difference) …………… 12,204,482
14–88 Intermediate Accounting, 8/e
Problem 14–10
Requirement 1
Land ………………………………………………………………….. 600,000
Notes payable (face amount) ………………………………… 600,000
Problem 14–10 (concluded)
Not required, but recorded at the same date (may be combined with interest
entry):
Notes payable (face amount) …………………………………… 100,000
Cash ………………………………………………………………. 100,000
14–90 Intermediate Accounting, 8/e
Problem 14–11
Requirement 1
Interest $ 6,000 x 3.79079 * = $ 22,745
Principal $150,000 x 0.62092 ** = 93,138
Present value (price) of the note $115,883
Problem 14–12
Requirement 1
$6,074,700 ÷ $2,000,000 = 3.03735
present installment present value
value payment table amount
Problem 14–13
Requirement 1
Interest $5,000¥ x 3.16987 * = $15,849
Principal $100,000 x 0.68301 ** = 68,301
Present value (price) of the note $84,150
¥ 5% x $100,000
Problem 14–13 (concluded)
Requirement 4
$84,150 ÷ 3.16987 = $26,547
amount (from Table 4) installment
of loan n = 4, i = 10% payment
14–94 Intermediate Accounting, 8/e
Problem 14–14
Bonds payable (face amount) …………………………………… 800,000
Loss on early extinguishment (to balance) ………………… 13,100
Problem 14–15
Requirement 1
Interest expense (7% x $19,000,000) ………………………………. 1,330,000
Problem 14–16
1. Issuance of the bonds.
Cash ($385,000 – 1,500) ………………………………………….. 383,500
2. December 31, 2016
Interest expense ($20,000 + 750) ……………………………………. 20,750
3. June 30, 2017
Interest expense ($20,000 + 750) ……………………………………. 20,750
4. Call of the bonds
Bonds payable (face amount) ………………………………….. 400,000
14–96 Intermediate Accounting, 8/e
Problem 14-17
Under IFRS, transaction costs reduce the recorded amount of the debt, as well as the net
cash the issuing company receives from the sale of the bonds. A lower [net] amount is
borrowed at the same cost, increasing the effective interest rate. Since the recorded amount
of the debt is reduced by the transaction costs, the higher rate will be reflected in a higher
recorded interest expense.
1. Issuance of the bonds
Cash ($385,000 – 1,500)…………………………………………… 383,500
2. December 31, 2016
3. June 30, 2017
4. Call of the bonds
Bonds payable ($383,500 + 825 +825) ……………………….. 385,150
Problem 14–18
Requirement 1
Bonds payable (face amount) ………………………………….. 20,000,000
Problem 14–19
Requirement 1
($ in millions)
Convertible Bonds—2003 issue
Cash (97.5% x $200 million) ……………………………………………….. 195
Requirement 2
($ in millions)
Convertible bonds payable (90% x $200 million) …………………. 180
Problem 14–19 (concluded)
Requirement 4
($ in millions)
Convertible bonds payable (90% x $200 million) ………………….. 180.0
14–100 Intermediate Accounting, 8/e
Problem 14–20
Requirement 1
Microsoft’s note states that the company issued $1.25 billion of zero-coupon
.
Requirement 2
($ in millions)
Cash (proceeds given in Note 12) ……………………………. 1,240
Debt issue costs (to balance) ………………………………… 1