Exercise 9-28A, Obj. 1, 5
Student Name
Course Name
Student ID:
Date:
a. Sales of $2,100,000 are subject to estimated warranty cost of 2%. The estimated warranty
payable at the beginning of the year was $35,000, and warranty payments for the year
totaled $58,000.
b. On March 1, Banff Electronics signed a $45,000 note payable that requires annual
payments of $9,000 plus 5% interest on the unpaid balance each March 2.
c. Buy More, Inc., a chain of music stores, ordered $105,000 worth of wireless speakers
and related products. With its order, Buy More sent a check for $105,000 in advance, and Banff
shipped $60,000 of the goods. Banff will ship the remainder of the goods on April 3, 2016.
d. The March payroll of $220,000 is subject to employee withheld income tax of $30,700
and FICA tax of 7.65%. On March 31, Banff pays employees their take-home pay and
accrues all tax amounts.
Students: Please fill-in areas that are
shaded.
Report current and long-term liabilities
Financial Accounting
Assume that Banff Electronics completed these selected transactions during March 2016:
Exercise 9-28A
Instructions
1. Report these items on Banff Electronics’ balance sheet at March 31, 2016.
Letter
Current liabilities:
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Total current liabilties –$
Long-term liabilities:
. . . . . . . . . . . . . .
Test Your Knowledge
Banff Electronics
Balance Sheet (partial)
March 31, 2016
Financial Accounting
Assume that Banff Electronics completed these selected transactions during March 2016:
Students: Please fill-in areas that are shaded.
Report current and long-term liabilities
Balance Sheet (partial)
March 31, 2016
Test Your Knowledge
Banff Electronics
Problem 9-75A, Obj. 2
Student Name
Course Name
Student ID:
Date:
1. Journalize the following transactions of Lamore Communications, Inc.:
2016
Jan. 1 Issued $3,000,000 of 6%, 10-year bonds payable at 94.
Interest payment dates are July 1 and January 1.
July 1 Paid semiannual interest and amortized bonds by the
straight-line method on the 6% bonds payable.
Dec. 31 Accrued semiannual interest expense and amortized bonds
by the straight-line method on the 6% bonds payable.
2017
Jan. 1 Paid semiannual interest.
2026
Jan. 1 Paid the 6% bonds at maturity.
2. At December 31, 2016, after all year-end adjustments, determine the carrying amount of
Lamore Communications bonds payable, net.
3. For the six months ended July 1, 2016, determine the following for Lamore Communications, Inc.:
a. Interest expense b. Cash interest paid
What causes interest expense on the bonds to exceed cash interest paid?
Account for bonds payable at a discount; amortize by the
straightline method
Students: Please fill-in areas that are shaded in light
yellow.
Financial Accounting
Problem 9-75A
Requirement 1
DATE DEBIT CREDIT
2016
1-Jan
Enter explanation here
July 1
Enter explanation here
Dec. 31
Enter explanation here
2017
Jan. 1
Enter explanation here
2026
Jan. 1
Enter explanation here
Requirement 2
Carrying amount at December 31, 2016
Enter narrative of computation here.
Requirement 3
a. Interest expense =
b. Cash interest paid =
Test Your Knowledge
Journal
ACCOUNT TITLES AND EXPLANATION
Enter explanation here for requirement 3.
Problem 9-75A, Obj. 2
Student Name
Course Name
Student ID:
Date:
1.
Journalize the following transactions of Lamore Communications, Inc.:
2016
Jan. 1 Issued $3,000,000 of 6%, 10-year bonds payable at 94.
Interest payment dates are July 1 and January 1.
July 1 Paid semiannual interest and amortized bonds by the
straight-line method on the 6% bonds payable.
Dec. 31 Accrued semiannual interest expense and amortized bonds
by the straight-line method on the 6% bonds payable.
2017
Jan. 1 Paid semiannual interest.
2026
Jan. 1 Paid the 6% bonds at maturity.
2. At December 31, 2016, after all year-end adjustments, determine the carrying amount of
Lamore Communications bonds payable, net.
3. For the six months ended July 1, 2016, determine the following for Lamore Communications, Inc.:
a. Interest expense b. Cash interest paid
What causes interest expense on the bonds to exceed cash interest paid?
Students: Please fill-in areas that are shaded in light
yellow.
Account for bonds payable at a discount; amortize by the
straightline method
Financial Accounting
Problem 9-75A
Requirement 1
DATE DEBIT CREDIT
2016
1-Jan 2,820,000
2017
Jan. 1 Interest Payable 90,000
2026
Jan. 1 Bond Payable 3,000,000
Requirement 2
Requirement 3
Journal
ACCOUNT TITLES AND EXPLANATION
Cash ($3,000,000 x .94)
Test Your Knowledge
Bonds Payable
Discount on Bonds Payable ($180,000/20)
Discount on Bonds Payable
Cash ($3,000,000 x .06 x 6/12)
Interest Payable ($3,000,000 x .06 x 6/12)
Discount on Bonds Payable
Problem 9-77A, Obj. 2, 5
Student Name
Course Name
Student ID:
Date:
On December 31, 2016, Rugaboo Corp. issued 6%, 10-year convertible bonds payable with
a maturity value of $4,000,000. The semiannual interest dates are June 30 and December 31.
The market interest rate is 8%. Rugaboo Corp. amortizes bond discount by the effective-interest method.
Problem 9-77A
Instructions
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Prepare an effective-interest-method amortization table for the term of the bonds
(Use Exhibit 9-4 as a model)
3. Journalize the following transactions:
a. Issuance of the bonds on December 31, 2016. Credit Convertible Bonds Payable.
b. Payment of interest and amortization of the bonds on June 30, 2017.
c. Payment of interest and amortization of the bonds on December 31, 2017.
d. Conversion by the bondholders on July 1, 2018, of bonds with face value of
$1,600,000 into 50,000 shares of Rugaboo Corp.’ $1-par common stock.
4. Show how Rugaboo Corp. would report the remaining bonds payable on its balance
sheet at December 31, 2018.
Requirement 1
The issue price of the bonds is:
Issuing convertible bonds at a discount, amortizing by the effective
interest method, retiring bonds early, converting bonds, and
reporting the bonds payable on the balance sheet.
Students: Please fill-in areas that are
shaded in light yellow.
Financial Accounting
Test Your Knowledge
Requirement 2
A B C D E
Interest
Payment
Interest
Expense
Discount
Amortization
Discount
Account
Balance
Bond Carrying
Amount
543,613$ 3,456,387$
120,000
Requirement 3
DATE DEBIT CREDIT
2016
a. Dec. 31 3,456,387
Enter explanation here.
2017
b. June 30
Enter explanation here.
c. Dec. 31
Enter explanation here.
Semiannual Interest
Date
12-31-16
Journal
ACCOUNT TITLES AND EXPLANATION
2018
d. July 1
50,000
Enter explanation here.
Requirement 4
Enter account name here
Less: Discount on bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . 279,655 FORMULA
Common Stock
Solution Sat, Oct 13, 2007
Problem 9-77A, Obj. 2, 5
Student Name
Course Name
Student ID:
Date:
On December 31, 2016, Rugaboo Corp. issued 6%, 10-year convertible bonds payable with
a maturity value of $4,000,000. The semiannual interest dates are June 30 and December 31.
The market interest rate is 8%. Rugaboo Corp. amortizes bond discount by the effective-interest method.
Problem 9-77A
Instructions
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Prepare an effective-interest-method amortization table for the term of the bonds
(Use Exhibit 9-4 as a model)
3. Journalize the following transactions:
a. Issuance of the bonds on December 31, 2016. Credit Convertible Bonds Payable.
b. Payment of interest and amortization of the bonds on June 30, 2017.
c. Payment of interest and amortization of the bonds on December 31, 2017.
d. Conversion by the bondholders on July 1, 2018, of bonds with face value of
$1,600,000 into 50,000 shares of Rugaboo Corp.’ $1-par common stock.
4. Show how Rugaboo Corp. would report the remaining bonds payable on its balance
sheet at December 31, 2018.
Requirement 1
The issue price of the bonds is: $3,456,387 (using the PV function in EXCEL)
Test Your Knowledge
Financial Accounting
Students: Please fill-in areas that are
shaded in light yellow.
Issuing convertible bonds at a discount, amortizing by the effective
interest method, retiring bonds early, converting bonds, and reporting
the bonds payable on the balance sheet.
Solution Sat, Oct 13, 2007
Requirement 2
A B C D E
Interest
Payment
Interest
Expense
Discount
Amortization
Discount
Account
Balance
Bond Carrying
Amount
543,613$ 3,456,387$
120,000 138,255 18,255 525,358 3,474,642
Requirement 3
DATE DEBIT CREDIT
2016
a. Dec. 31 3,456,387
c. Dec. 31 Interest Expense 138,986
Cash
Cash
Semiannual Interest
Date
31-Dec-16
30-Jun-17
Journal
ACCOUNT TITLES AND EXPLANATION
Cash
120,000 138,986 18,986 506,372 3,493,628
120,000 139,745 19,745 486,627 3,513,373
120,000 140,535 20,535 466,092 3,533,908
120,000 141,356 21,356 444,735 3,555,265
120,000 142,211 22,211 422,525 3,577,475
120,000 143,099 23,099 399,426 3,600,574
120,000 144,023 24,023 375,403 3,624,597
120,000 144,984 24,984 350,419 3,649,581
120,000 145,983 25,983 324,436 3,675,564
120,000 147,023 27,023 297,413 3,702,587
120,000 148,103 28,103 269,310 3,730,690
120,000 149,228 29,228 240,082 3,759,918
120,000 150,397 30,397 209,685 3,790,315
120,000 151,613 31,613 178,073 3,821,927
120,000 152,877 32,877 145,196 3,854,804
120,000 154,192 34,192 111,004 3,888,996
120,000 155,560 35,560 75,444 3,924,556
120,000 156,982 36,982 38,461 3,961,539
120,000 158,462 38,462 (0) 4,000,000
30-Jun-21
30-Jun-22
31-Dec-22
30-Jun-23
31-Dec-23
30-Jun-24
30-Jun-18
31-Dec-18
30-Jun-19
31-Dec-19
30-Jun-20
31-Dec-20
31-Dec-17
31-Dec-24
30-Jun-25
31-Dec-25
30-Jun-26
31-Dec-26
31-Dec-21
Solution Sat, Oct 13, 2007
2018
d. July 1 Convertible Bonds Payable 1,600,000
Exercise 9-31A, Obj. 2
Student Name
Course Name
Student ID:
Date:
Financial Accounting
Issue bonds payable (discount), record interest payments and the
related bond amortization using the effective-interest method
Score Ltd. is authorized to issue $2,000,000 of 3%, 10-year bonds payable. On December 31, 2016, when the
market interest rate is 7%, the company issues $1,600,000 of the bonds. Score Ltd. amortizes bond discount by
the effective-interest method. The semiannual interest
dates are June 30 and December 31.
Students: Please fill-in areas that are shaded
in light yellow.
Exercise 9-31A
Instructions
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Using exhibit 9-4 as an example, prepare a bond amortization table for the term of the bonds.
3. Record issuance of the bonds payable on December 31, 2016; the first semiannual interest
payment on June 30, 2017; and the second payment on December 31, 2017.
Requirement 1
The issue price of the bonds is:
Requirement 2
A B C D E
Interest
Payment
(1.5% of
Maturity
Value)
Interest
Expense
(3.5% of
Preceding
Bond
Carrying
Amount
Discount
Amortization
(B-A)
Discount
Account
Balance
(Preceding D-
C)
Bond Carrying
Amount
($1,600,000-D)
454,797$ 1,145,203$
24,000
Test Your Knowledge
Semiannual Interest
Date
Dec. 31, 2016
Requirement 3
DATE DEBIT CREDIT
2016
Dec. 31 1,145,203$
Enter explantion here
2017
June 30
Enter explantion here
2018
Dec. 31
Enter explantion here
Cash
Journal
ACCOUNT TITLES AND EXPLANATION
Exercise 9-31A, Obj. 2
Student Name
Course Name
Student ID:
Date:
Financial Accounting
Issue bonds payable (discount), record interest payments and the
related bond amortization using the effective-interest method
Score Ltd. is authorized to issue $2,000,000 of 3%, 10-year bonds payable. On December 31, 2016, when the market
interest rate is 7%, the company issues $1,600,000 of the bonds. Score Ltd. amortizes bond discount by the effective-
interest method. The semiannual interest
dates are June 30 and December 31.
Students: Please fill-in areas that are shaded in
light yellow.
Exercise 9-31A
Instructions
1. Use the PV function in Excel to calculate the issue price of the bonds.
2. Using exhibit 9-4 as an example, prepare a bond amortization table for the term of the bonds.
3. Record issuance of the bonds payable on December 31, 2016; the first semiannual interest
payment on June 30, 2017; and the second payment on December 31, 2017.
Requirement 1
The issue price of the bonds is: using the PV function in EXCEL, the issue price is $1,145,203
Requirement 2
A B C D E
Interest
Payment
Interest
Expense
Discount
Amortization (B-A)
Discount
Account
Bond Carrying
Amount
454,797$ 1,145,203$
24,000 40,082 16,082 438,715 1,161,285
Dec. 31, 2016
June 30, 2017
Test Your Knowledge
Semiannual Interest
June 30, 2024
Dec. 31, 2024
June 30, 2025
Dec. 31, 2025
June 30, 2026
Dec. 31, 2026
June 30, 2021
Dec. 31, 2021
June 30, 2022
Dec. 31, 2022
June 30, 2023
Dec. 31, 2023
Dec. 31, 2017
June 30, 2018
June 30, 2020
Dec. 31, 2020
Dec. 31. 2018
June 30, 2019
Dec. 31, 2019
Requirement 3
DATE DEBIT CREDIT
2016
Dec. 31 1,145,203$
Journal
ACCOUNT TITLES AND EXPLANATION
Cash
June 30 Interest Expense 40,082$
Dec. 31 Interest Expense 40,645$
Cash
Cash