10 Chapter Optional Problem Solutions P106. Req. 1 Computations: Interest: $700,000 x 8% Present value $ 700,000 x 0.6209 $ 56,000 x 3.7908 Issue Price =$ = = 56,000 434,630 212,285 $646,915
Req. 2 2006 Interest expense...................................... $66,617 * 2007 $66,617 *
*$700,000 - $646,915 = $53,085 5 years = $10,617 + $56,000 = $66,617 Req. 3 Cash paid................................................. 2006 $56,000 2007 $56,000
Req. 4 2006 Bonds payable......................................... $657,532* *$646,915 + $10,617 = $657,532 **$657,532+ $10,617 = $668,149 2007 $668,149**
P107. Req. 1 Computations: Interest: $1,000,000 x 10% Present value $ 1,000,000 x 0.5674 $ 100,000 x 3.6048 =$ = = 100,000 567,400 360,480 $927,880
Req. 2 2006 Interest expense...................................... $927,880 $111,346* x 12% = $111,346 **[$927,880+ ($111,346- $100,000)] x 12% = $112,707 Req. 3 2006 Cash paid................................................. $100,000 2007 $100,000 2007 $112,707**
Req. 4 2006 Bonds payable......................................... $939,226* *$927,880 + $11,346 = $939,226 **$939,226 + $12,707 = $951,933 2007 $951,933**
AP102. (000s): At At At At End End End End of 2006 of 2007 of 2008 of 2009 Case A: Sold at Par Interest expense on the income statement Net liability on balance sheet Case B: Sold at a discount Interest expense on the income statement Net liability on balance sheet Case C: Sold at a premium Interest expense on the income statement Net liability on balance sheet 10 100 12 92 8 108 10 100 12 94 8 106 10 100 12 96 8 104 10 100 12 98 8 102