Financial Chapter1

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
Effective-Interest Method—Semiannual Interest Payments
10% Bonds Issued at 8%

Semi-
annual
Interest
Periods
(A)

Interest
to Be
Paid(B)

Interest
Expense(C)
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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