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General Instructions
1. The following worksheet may be used to complete the exercise/problem. You may need to refer to your textbook for additional information.
P 10-2A
Required
(Round your answers to nearest whole dollar amounts)
Interest expense 18,489$
Discount amortization 5,989$
2018
Dec. 31 Interest Expense 3,691
3. Prepare the journal entry for the payment of interest and the amortization of discount on December 31, 2018 (the third year), and
determine the balance sheet presentation of the bonds on that date.
Ortega Company issued five-year, 5% bonds with a face value of $50,000 on January 1, 2016. Interest is paid annually on December 31.
The market rate of interest on this date is 8%, and Ortega Company receives proceeds of $44,011 on the bond issuance.
1. Prepare a five-year table to amortize the discount using the effective interest
Discount Amortization
Effective Interest Method of Amortization
2. What is the total interest expense over the life of the bonds? cash interest payment? discount amortization?
General Instructions
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, and dollars or numbers in the $ cells.
P10-2
Required
(Round your answers to nearest whole dollar amounts)
Interest expense 5,721$
2. What is the total interest expense over the life of the bonds? cash interest payment?
discount amortization?
Stacy Company issued five-year, 10% bonds with a face value of $10,000 on January 1, 2016. Interest is paid annually on December 31. The market rate
of interest on this date is 12%, and Stacy Company receives proceeds of $9,279 on the bond issuance.
1. Prepare a five-year table to amortize the discount using the effective interest method.
Discount Amortization
Effective Interest Method of Amortization
2018
Dec. 31 Interest Expense 1,142
Discount on Bonds Payable 142
3. Prepare the journal entry for the payment of interest and the amortization of discount on
2018 (the third year), and determine the balance sheet presentation of the bonds on that date.
General Instructions
1. The following worksheet may be used to complete the exercise/problem. You may need to refer to your textbook for additional information.
P10-3A
Required
Col. 1 Col. 2 Col. 3 Col. 4
Interest expense 10,273$
Cash interest payment 12,500
Premium amortized 2,227$
2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization?
3. Prepare the journal entry for the payment of interest and the amortization of premium on December 31,
2018 (the third year), and determine the balance sheet presentation of the bonds on that date.
Ortega Company issued five-year, 5% bonds with a face value of $50,000 on January 1, 2016. Interest is paid annually on December 31.
The market rate of interest on this date is 4%, and Ortega Company receives proceeds of $52,227 on the bond issuance.
1. Prepare a five-year table to amortize the premium using the effective interest method.
Premium Amortization
Effective Interest Method of Amortization
General Instructions
1. The following worksheet may be used to complete the exercise/problem. You may need to refer to your textbook for additional information.
P10-3
Required
1. Prepare a five-year table (similar to Exhibit 10-4) to amortize the dicount using the effective interest method.
Col. 1 Col. 2 Col. 3 Col. 4
Cash Interest Premium
Interest expense 4,201$
2018
Dec. 31 Interest Expense 841
Premium on Bonds Payable 159
Cash 1,000
To record interest and amortization of premium.
Stacy Company issued five-year, 10% bonds with a face value of $10,000 on January 1, 2016. Interest is paid annually on December 31. The
market rate of interest on January 1, 2016, is 8%, and Stacy Company receives proceeds of $10,799 on the bond issuance.
Premium Amortization
Effective Interest Method of Amortization
2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization?
3. Prepare the journal entry for the payment of interest and the amortization of premium on
2018 (the third year), and determine the balance sheet presentation of the bonds on that date.
General Instructions
1. The following worksheet may be used to complete the exercise/problem.
You may need to refer to your textbook for additional information.
P10-5
Required
Col. 1 Col. 2 Col. 3 Col. 4
2. Prepare the journal entry for the lease transaction on January 1, 2016.
2016
Jan. 1 Leased Truck 112,994
Lease Liability 112,994
To record acquisition by lease.
1. Prepare a table to show the five-year amortization of the lease obligation.
Lease Amortization: Effective Interest Method of Amortization
On January 1, 2016, Muske Trucking Company leased a semitractor and trailer for five years. Annual payments of
2017
Dec. 31 Lease Liability 20,801
Interest Expense 7,499
Long-term assets:
Leased truck 112,994$
4. Prepare the balance sheet presentation as of December 31, 2017, for the leased asset and the lease obligation.
Balance Sheet Presentation
As of December 31, 2017
3. Prepare all necessary journal entries on December 31, 2017 (the second year of the lease).
General Instructions
2. The blue cells are for data entry. Enter text in the T cells, formulas in the F cells, and
dollars or numbers in the $ cells.
P10-7A
(In thousands) Year 1 Year 2 Year 3
Income before taxes
$120 $120 $120
Required
(Enter amounts in whole dollars not in thousands.)
Year 1 120,000$
(5,000)
(10,000)
105,000$
42,000$
Excess of tax depreciation over book depreciation
Taxable income
Taxes paid or payable (40%)
1. Determine the amount of cash that Clemente paid for income taxes each year. Assume
that a 40% tax rate applies to all three years.
Income before taxes
Tax-exempt income
Clemente Inc. has reported income for book purposes as follows for the past three years:
(Enter amounts in whole dollars not in thousands.)
The deferred tax entry for Years 1-3 would contain the following information:
2. Calculate the balance in the Deferred Tax account at the end of Years 1, 2, and 3. How does this
account appear on the balance sheet?
