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823
Exercise 14-13B (30 minutes)
2. Total bond interest expense over the life of the bonds
Amount repaid
Six payments of $22,500* .......................
$135,000
3. Effective interest amortization table
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[4.5% x $500,000]
(B)
Bond Interest
Expense
[6% x Prior (E)]
(C)
Discount
Amortization
[(B) - (A)]
(D)
Unamortized
Discount
[Prior (D) - (C)]
(E)
Carrying
Value
[$500,000 - (D)]
1/01/2017
$36,860
$463,140
824
Exercise 14-14B (30 minutes)
2. Total bond interest expense over the life of the bonds
Amount repaid
3. Effective interest amortization table
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[6.5% x $400,000]
(B)
Bond Interest
Expense
[6% x Prior (E)]
(C)
Premium
Amortization
[(A) - (B)]
(D)
Unamortized
Premium
[Prior (D) - (C)]
(E)
Carrying
Value
[400,000 + (D)]
1/01/2017
$9,850
$409,850
825
Exercise 14-15 (40 minutes)
1. Straight-line amortization table ([$100,000-$95,952]/8 = $506)
Semiannual
Period-End
Unamortized
Discount †
Carrying
Value
1/01/2017(issuance) ..........
$4,048
$95,952
6/30/2017 .....................
3,542
96,458
826
Exercise 14-15 (Concluded)
2.
2017
June 30
Bond Interest Expense ..................................................
4,006
Record 6 months’ interest and discount amortization.
3.
Exercise 14-16 (20 minutes)
2017
Jan. 1
Cash ................................................................................
3,400,000
Bonds Payable .........................................................
3,400,000
827
Exercise 14-17C (10 minutes)
Exercise 14-18C (20 minutes)
1.
Leased Asset—Office Equipment ..............................................
41,000
Exercise 14-19C (15 minutes)
[Note: 12% / 12 months = 1% per month as the relevant interest rate.]
828
Exercise 14-20 (20 minutes)
(amounts in euros millions)
1.
Cash.................................................................................
1,888
2.
Loans and Borrowings ..................................................
1,700
3. Heineken’s Loans and Borrowings carried a premium of €658 as of
4. The contract rate was higher than the market rate at issuance. This is
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 14
829
PROBLEM SET A
Problem 14-1A (50 minutes)
Part 1
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value .....................
B.1
0.4564
$40,000
$18,256
b.
Part 2
a.
Cash Flow
Table
Table Value*
Amount
Present Value
830
Problem 14-1A (Concluded)
Part 3
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ....................
B.1
0.3118
$40,000
$12,472
b.
2017
831
Problem 14-2A (40 minutes)
Part 1
2017
Jan. 1
Cash ................................................................
3,456,448
Part 2
[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout the bonds’
life because this company uses straight-line amortization.]
Part 3
Thirty payments of $120,000 ....................
$3,600,000
Part 4 (Semiannual amortization: $543,552/30 = $18,118.4)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2017 .....................
$543,552
$3,456,448
832
Problem 14-2A (Concluded)
Part 5
2017
June 30
Bond Interest Expense ..................................................
138,118
Problem 14-3A (40 minutes)
Part 1
2017
Jan. 1
Cash ................................................................................
4,895,980
Part 2
(a) Cash Payment = $4,000,000 x 6% x 6/12 = $120,000
833
Problem 14-3A (Concluded)
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2017 .....................
$895,980
$4,895,980
Part 5
2017
June 30
Bond Interest Expense ................................
90,134
Problem 14-4A (45 minutes)
Part 1
Ten payments of $8,125* ..........................
$ 81,250
Part 2
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2017
$5,333
$255,333
6/30/2017
4,800
254,800
12/31/2017
4,267
254,267
12/31/2020
1,069
261,069
6/30/2021
533**
250,533
12/31/2021
0
250,000
835
Problem 14-4A (Concluded)
Part 3
2017
June 30
Bond Interest Expense ................................
7,592
2017
Dec. 31
Bond Interest Expense ................................
7,592
836
Problem 14-5A (60 minutes)
Part 1
2017
Jan. 1
Cash ................................................................
292,181
Part 2
Eight payments of $8,125* ...................
$ 65,000
Par value at maturity ............................
325,000
Part 3 Straight-line amortization table ($32,819/8 =$4,102*)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2017
$32,819
$292,181
837
Problem 14-5A (Concluded)
Part 4
2017
June 30
Bond Interest Expense ................................
12,227
Discount on Bonds Payable ................................
4,102
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 5%
would have been greater than the market rate.
838
Problem 14-6A (45 minutes)
Background: Amount of Payment (given in the problem)
Note balance
$200,000
Part 1
Payments
Period
Ending
Date
(A)
Beginning
Balance
[Prior (E)]
(B)
Debit
Interest
Expense
[8% x (A)]
+
(C)
Debit
Notes
Payable
[(D) - (B)]
=
(D)
Credit
Cash
[computed]
(E)
Ending
Balance
[(A) - (C)]
10/31/2018 ............
$200,000
$ 16,000
$ 34,091
$ 50,091
$165,909
Part 2
2017
Dec. 31
Interest Expense ............................................................
2,667
839
Problem 14-7A (20 minutes)
Part 1
Part 2
Scott’s debt-to-equity ratio is higher than Pulaski's. This implies that Scott
840
Problem 14-8AB (60 minutes)
Part 1
2017
Jan. 1
Cash ................................................................
292,181
Part 2
Eight payments of $8,125* ...................
$ 65,000
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[2.5% x $325,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Discount
Amortization
[(B) - (A)]
(D)
Unamortized
Discount
[Prior (D) - (C)]
(E)
Carrying
Value
[$325,000 - (D)]
1/01/2017
$32,819
$292,181
841
Problem 14-8AB (Concluded)
Part 4
2017
June 30
Bond Interest Expense ................................
11,687
2017
Dec. 31
Bond Interest Expense ................................
11,830
842
Problem 14-9AB (45 minutes)
Part 1
Ten payments of $8,125* ...........................
$ 81,250
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)]
1/01/2017
$5,333
$255,333
6/30/2017
$ 8,125
$ 7,660
$ 465
4,868
254,868
*Adjusted for rounding.
