$800,000 M10-2) M10-3) $266,106 M10-4) Jan. 1 Cash Discount on bonds payable Bonds payable 752,896 47,104 800,000 82,819 2,819 80,000
Dec. 31 Bond interest expense Discount on bonds payable Cash M10-5) Jan. 1 Cash Discount on bonds payable Bonds payable
580,000 20,000 600,000 62,000 2,000 60,000
Dec. 31 Bond interest expense Discount on bonds payable Cash E10-2)
AT&Ts bond has a coupon interest rate of 6.5%, currently provides a cash yield of 7.3%, and has a selling price of 89.5% of par. $8,950 The decline in value would have no impact on the financial statements of AT&T. E10-11) 1) $951 2) Discount of $49 3) $90 4) 2006 = $105 2007 = $106 2008 = $108 5) Balance sheet: Long-Term Liabilities: Bonds payable 2006 $966 2007 $982 2008 $1,000
P10-3) Case A (Par) Case B (at 98) Case C (at 102)
a. Cash received at issue b. Bond interest expese, for pretax 2006 c. Bonds payable, 7 percent d. Unamortized discount e. Unamortized premium f. Net liability g. Stated interest rate P10-12)
$500,000 $35,000 $500,000 $0 $0 $500,000 7%
$490,000 $36,000 $491,000 $456,000 $0 $491,000 7.2%
$510,000 $34,000 $509,000 $0 $474,000 $509,000 6.8%
Date Cash Interest Amortization Balance January 1, 2006 $6,101 End of year 2006 $450 $427 $23 6,078 End of year 2007 450 425 25 6,053 End of year 2008 450 424 26 6,027 End of year 2009 450 422 27 6,000 2) $6,000 3) $6,101 4) Premium, $101 5) Each period = $450 Full life = $1,800
1)
6) Effective-interest amortization was used since the interest and amortization amounts changed each period. 7) 7.5% 8) 7% 9) 2006 = $427 2007 = $425 2008 = $424 2009 = $422 10) Balance sheet: Long-Term Liabilities: Bonds payable 2006 2007 2008 2009
$6,078 $6,053 $6,027 $6,000