Financial Chapter1

Topics: Generally Accepted Accounting Principles, Liability, Bonds Pages: 5 (302 words) Published: October 8, 2013
Solution – Chapter 10
E 10-9
Assets=Liabilities+EquityDate
CashBond PayableInterest PayableInterest Expense
+300,000+300,000(a)Jan 1
-12,000-12,000*(b) July 1
+12,000-12,000(C) Dec 31

*(R$300,000 X 8% X 1/2) = 12,000
E 10-10
(a)1.
Assets=Liabilities+EquityDate
CashBond PayableDiscount on B/P
+485,000+500,000-15,000

2.Semiannual interest payments
  ($20,000* X 10)$200,000
Plus: bond discount 15,000
Total cost of borrowing$215,000
*($500,000 X .08 X 6/12)

OR

Principal at maturity$500,000
Semiannual interest payments
  ($20,000 X 10) 200,000
Cash to be paid to bondholders700,000
Cash received from bondholders (485,000)
Total cost of borrowing$215,000

(b) 1.
Assets=Liabilities+EquityDate
CashBond PayablePremium on B/P
+525,000+500,000+25,000

2.Semiannual interest payments
  ($20,000 X 10)$200,000
Less: bond premium 25,000
Total cost of borrowing$175,000
OR
Principal at maturity$500,000
Semiannual interest payments
  ($20,000 X 10) 200,000
Cash to be paid to bondholders700,000
Cash received from bondholders (525,000)
Total cost of borrowing$175,000

P10-6A
(a)
Assets=Liabilities+EquityDate
CashBond PayablePremium on B/P
+2,271,813+2,000,000+271,813(a) July 1, 2011

(b)
ATWATER CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments
10% Bonds Issued at 8%

Semi-
annual
Interest
Periods
(A)

Interest
to Be
Paid(B)

Interest
Expense(C)
Premium
Amor-
tization
(A) – (B)(D)

Bond
Carrying
Value

Issue date
1
2
3
$100,000
 100,000
 100,000
$90,873
 90,507
 90,128
$9,127
 9,493
 9,872$2,271,813
 2,262,686
 2,253,193
 2,243,321

(C), (d), (e)
Assets=Liabilities+EquityDate
CashPremium on B/PInterest PayableInterest Expense
-9,127+100,000-90,873(c)Dec 31, 2011
-100,000-9,493-90,507(d)July 1, 2012
-9,872+100,000-90,128(e)Dec 31,2012

P10-7A
(a)
Assets=Liabilities+EquityDate
CashBond PayableDiscount on B/PInterest PayableInterest Expense +3,501,514+4,000,000-498,486(1)July 1, 2011
+15,076+160,000
  (€4,000,000 X 4%)-175,076
(€3,501,514 X 5%)(2)Dec 31, 2011
-160.000+15,830-175,830(3)July 1, 2012
+16,621+160,000-176,621(4)Dec 31, 2012

(b)Bonds payable€3,549,041*

*(€3,501,514 + €15,076 + €15,830 + €16,621)

P10-7B
(a)
Assets=Liabilities+EquityDate
CashBond PayablePremium on B/P
+630,000*+600,000+30,000(a) Jan 1, 2011

*(R$600,000 X 1.05)
(b)
Non-current Liabilities
Bond Payable, due 2021R$627,000*

Current Liabilities
Bond Interest Payable (R$600,000 X 9% X 1/2)R$27,000

*R$600,000 + R$30,000 – (R$30,000 ÷ 10)

(c)

Assets=Liabilities+EquityDate
CashBond PayablePremium on B/PLoss on Bond Redemption -630,000-600,000-24,000-6,000*(a) Jan 1, 2013

*(R$630,000 – R$624,000)


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