Problem 10–9AB (Concluded)
Part 3
2016
June 30
Bond Interest Expense …………………………..
7,660
Premium on Bonds Payable …………………………..
2016
Dec. 31
Bond Interest Expense …………………………..
7,646
Premium on Bonds Payable …………………………..
Part 4
As of December 31, 2018
Cash Flow
Table
Table Value*
Amount
Present Value
Par value …………………
B.1
0.8885
$250,000
$222,125
B.3
3.7171
Comparison to Part 2 Table
This present value ($252,326) equals the carrying value of the bonds in
Problem 10-10AB (60 minutes)
Part 1
2016
Part 2
Six payments of $9,900 ……………………….
$ 59,400
Par value at maturity …………………………..
Less amount borrowed ………………………..
Six payments of $9,900 ………………………..
$ 59,400
Less premium………………………………………
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)]
1/01/2016
$4,566
$184,566
Problem 10-10AB (Concluded)
Part 4
2016
June 30
Bond Interest Expense …………………………..
9,228
Premium on Bonds Payable …………………………..
2016
Dec. 31
Bond Interest Expense …………………………..
9,195
Premium on Bonds Payable …………………………..
Part 5
2018
Jan. 1
Bonds Payable ……………………………………………………..
180,000
Premium on Bonds Payable …………………………..
1,670
Part 6
If the market rate on the issue date had been 12% instead of 10%, the bonds
would have sold at a discount because the contract rate of 11% would have been
lower than the market rate.
Problem 10–11AD (35 minutes)
Part 1
Present Value of the Lease Payments
Part 2
Leased Asset—Office Equipment …………………………..
Part 3
Capital Lease Liability Payment (Amortization) Schedule
Period
Ending
Date
Beginning
Balance of
Lease
Liability
Interest on
Lease
Liability
(8%)
Reduction
of Lease
Liability
Cash
Lease
Payment
Ending
Balance of
Lease
Liability
Year 1
$39,927
$ 3,194*
$ 6,806
$ 10,000
$33,121
Year 3
Year 5
Part 4
Depreciation Expense—Leased Asset, Off. Equip ……………….
7,985
PROBLEM SET B
Problem 10-1B (50 minutes)
Part 1
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.6139
$90,000
$55,251
B.3
7.7217
b.
2016
Jan. 1
Cash ……………………………………………………….
96,948
Part 2
a.
Cash Flow
Table
Table Value*
Amount
Present Value
Par value ……………..
B.1
0.5584
$90,000
$50,256
B.3
7.3601
b.
2016
Jan. 1
Cash ……………………………………………………….
90,000
Problem 10-1B (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
b.
2016
Jan. 1
Cash ……………………………………………………….
83,674
Problem 10-2B (40 minutes)
Part 1
2016
Jan. 1
Cash ……………………………………………………….
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.]
Problem 10-2B (Concluded)
Part 3
Twenty payments of $170,000 ………………
$3,400,000
Par value at maturity …………………………..
Total repaid ………………………………………….
Less amount borrowed ………………………..
Twenty payments of $170,000 ……………..
$3,400,000
Part 4 (Semiannual amortization: $390,000/20 = $19,500)
Semiannual
Period-End
Unamortized
Discount
Carrying
Value
1/01/2016 …………………
$390,000
$3,010,000
312,000
Part 5
2016
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 ……………………………………………………….
Problem 10-3B (40 minutes)
Part 1
2016
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
Par value at maturity …………………………..
3,400,000
Total repaid ………………………………………….
Less amount borrowed ………………………..
Twenty payments of $170,000 ………………
$3,400,000
Less premium………………………………………
(792,932)
Problem 10-3B (Concluded)
Part 4
Semiannual
Period-End
Unamortized
Premium
Carrying
Value
1/01/2016 …………………
$792,932
$4,192,932
634,344
Part 5
2016
June 30
Bond Interest Expense …………………………..
130,353
Premium on Bonds Payable …………………………..
2016
Dec. 31
Bond Interest Expense …………………………..
130,353
Premium on Bonds Payable …………………………..
Problem 10-4B (45 minutes)
Part 1
Ten payments of $14,400* …………………….
$ 144,000
Par value at maturity …………………………..
Total repaid ………………………………………….
Less amount borrowed ………………………..
Ten payments of $14,400 ……………………..
$ 144,000
Part 2
Straight-line amortization table ($12,988/10 = $1,299**)
Semiannual
Interest Period-End
Unamortized
Premium
Carrying
Value
1/01/2016
$12,988
$332,988
6/30/2016
11,689
331,689
6/30/2017
329,091
327,792
6/30/2018
326,493
6/30/2019
323,895
322,596
6/30/2020
321,299
Problem 10-4B (Concluded)
Part 3
2016
June 30
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable …………………………..
2016
Dec. 31
Bond Interest Expense …………………………..
13,101
Premium on Bonds Payable …………………………..
1,299
Problem 10-5B (60 minutes)
Part 1
2016
Part 2
Thirty payments of $7,200* ……………………
$ 216,000
$ 216,000
Part 3 Straight-line amortization table ($41,506/30= $1,384)
Semiannual
Interest Period-End
Unamortized
Discount
Carrying
Value
1/01/2016
$41,506
$ 198,494
6/30/2016
6/30/2017
Problem 10-5B (Concluded)
Part 4
2016
June 30
Bond Interest Expense …………………………..
8,584
2016
Dec. 31
Bond Interest Expense …………………………..
8,584
Problem 10-6B (45 minutes)
Part 1 Amount of Payment
Note balance ……………………………………………………….
$150,000
Number of periods …………………………………………………
Interest rate ……………………………………………………….
Part 2
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)]
9/30/2017 ………….
$150,000
$15,000
$ 45,316
$ 60,316
$104,684
Part 3
2016
Dec. 31
Interest Expense ……………………………………………………
3,750
Interest Payable ……………………………………………….
Interest Expense ……………………………………………………
Interest Payable …………………………………………………….
3,750
Notes Payable ……………………………………………………….
Cash ………………………………………………………………..
Problem 10-7B (30 minutes)
Part 1
Atlas Company
Part 2
Bryan’s debt–to-equity ratio is much higher than that for Atlas. This implies
Problem 10-8BB (60 minutes)
Part 1
2016
Jan. 1
Cash ……………………………………………………….
198,494
Part 2
Thirty payments of $7,200* ……………………
$ 216,000
$ 216,000
Part 3
Semiannual
Interest
Period-End
(A)
Cash Interest
Paid
[3% x $240,000]
(B)
Bond Interest
Expense
[4% x Prior (E)]
(C)
Discount
Amortization
[(B) – (A)]
(D)
Unamortized
Discount
[Prior (D) – (C)]
(E)
Carrying
Value
[$240,000 – (D)]
1/01/2016
$41,506
$198,494
6/30/2017