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
=
=
$540,000
= 54%
$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