Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
CHAPTER 15
SOLUTIONS TO EXERCISES—SET B
EXERCISE 15-1B
1. True.
2. True.
EXERCISE 15-2B
2016
(a) Jan. 1 Cash ...................................................... 500,000
Bonds Payable .............................. 500,000
EXERCISE 15-3B
2016
(a) Jan. 1 Cash ....................................................... 200,000
Bonds Payable ............................... 200,000
EXERCISE 15-4B
(a) 2016
Jan. 1 Cash ...................................................... 800,000
Bonds Payable .............................. 800,000
(b)
EXERCISE 15-5B
At 100
(a) (1) Cash ............................................................. 4,000,000
Bonds Payable ...................................... 4,000,000
At 98
(2) Cash ($4,000,000 X 98%) ............................. 3,920,000
Discount on Bonds Payable ....................... 80,000
Bonds Payable ...................................... 4,000,000
At 103
Retirement of bonds at maturity
(b) Bonds Payable ............................................ 4,000,000
Cash ...................................................... 4,000,000
Retirement of bonds before maturity at 98
Conversion of bonds into common stock
(d) Bonds Payable ............................................ 2,000,000
Common Stock ..................................... 600,000
Paid-in Capital in Excess of Par .............. 1,400,000
EXERCISE 15-6B
(a) (1) Cash ................................................................ 388,000
(2) Annual interest payments
($24,000* X 5) .............................................. $120,000
OR
Principal at maturity ....................................... $400,000
Annual interest payments
(b) (1) Cash ................................................................ 420,000
Bonds Payable ......................................... 400,000
Premium on Bonds Payable ................... 20,000
(2) Annual interest payments
($24,000 X 5) ............................................... $120,000
OR
Principal at maturity ....................................... $400,000
Annual interest payments
EXERCISE 15-7B
(a) Jan. 1 Interest Payable .................................... 128,000
Cash ............................................... 128,000
EXERCISE 15-8B
1. June 30 Bonds Payable .................................... 130,000
Loss on Bond Redemption
($133,900 – $117,500) ...................... 16,400
2. June 30 Bonds Payable .................................... 150,000
Premium on Bonds Payable ............... 1,000
3. Dec. 31 Bonds Payable .................................... 30,000
Common Stock
Note: As per the textbook, the market price of the stock is ignored in the
conversion.
EXERCISE 15-9B
2016
Issuance of Note
Dec. 31 Cash .............................................................. 250,000
Mortgage Payable................................. 250,000
2017
First Installment Payment
Dec. 30 Interest Expense
Cash ...................................................... 40,000
2018
Second Installment Payment
Dec. 31 Interest Expense
EXERCISE 15-10B
December 31, 2017
(a) Cash ...................................................................... 600,000
Mortgage Payable ........................................ 600,000
December 31, 2018
Interest Expense ($600,000 X 8%) ....................... 48,000
Mortgage Payable ................................................. 32,000
Cash.............................................................. 80,000
December 31, 2019
(b) Current: $34,560
EXERCISE 15-11B
Long-term liabilities
Bonds payable, due 2020 .............................. $180,000
EXERCISE 15-12B
Plan One
Issue Stock
Plan Two
Issue Bonds
Income before interest and taxes
$900,000
$900,000
EXERCISE 15-13B
(a) Total assets ............................................................ $1,000,000
Less: Total liabilities ............................................ 540,000
Total stockholders’ equity .................................... $ 460,000
(b)
Debt to assets ratio
=
Total liabilities
=
$540,000
= 54%
Total assets
$1,000,000
EXERCISE 15-14B
(a) Rent Expense ........................................ 400
Cash ............................................... 400
*EXERCISE 15-15B
2017
(a) Jan. 1 Cash ($400,000 X 103%) ........................ 412,000
Premium on Bonds Payable .......... 12,000
Bonds Payable ............................... 400,000
2018
(c) Jan. 1 Interest Payable .................................... 36,000
Cash ............................................... 36,000
*EXERCISE 15-16B
(a) 2016
Dec. 31 Cash ...................................................... 740,000
Discount on Bonds Payable ................ 60,000
Bonds Payable .............................. 800,000
(c) 2026
Dec. 31 Bonds Payable ..................................... 800,000
Cash ............................................... 800,000
*EXERCISE 15-17B
2017
(a) Jan. 1 Cash ...................................................... 375,076
Discount on Bonds Payable ................ 24,924
Bonds Payable .............................. 400,000
2018
(c) Jan. 1 Interest Payable .................................... 36,000
Cash ...................................................... 36,000
*EXERCISE 15-18B
2017
(a) Jan. 1 Cash ........................................................ 340,775
Premium on Bonds Payable ........... 40,775
Bonds Payable ................................ 300,000
SOLUTIONS TO PROBLEMS—SET C
PROBLEM 15-1C
(a) 2016
June 1 Cash .................................................. 2,000,000
Bonds Payable .......................... 2,000,000
(b) Dec. 31 Interest Expense ............................... 105,000
(d) 2017
June 1 Interest Payable ................................ 105,000
Interest Expense
