4 - (657,532 + 10,617 = 668,149) P10-7 Interest: $1,000,000...

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P10-3 CASE A CASE B CASE C a Cash received at issue $500,00 $490,000 $510,000 b Bond interest xp (pretax) $35,000 $36,000 $34,000 c Bonds payable @ 7% $500,000 $500,000 $500,000 d Unamortized discount (deduct) 9,000 e Unamortized premium (add) 9,000. f Net liability $500,000 $500,000 $500,000 Balance in account: $10,000 $10,000 Amortization: (1,000) (1,000) Unamortized balance: $9,000 $9,000 g Rate of interest 7% 7% 7% P10-6 Interest: $700,000 * 8% = $56,000 Present Value: $700,000 * 0.6209 = 434,630 $56,000 * 3.7908 = 212,285 Issue Price: $646,915 2006 2007 Interest XP $66,617 $66,617 (700,000 – 646,915 / 5 years = 10,617 + 56,000 = $66,617) Cash Paid $56,000 $56,000 Bonds Payable $657,532 $668,149 (646,915 + 10,617 = 657,532)
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Unformatted text preview: (657,532 + 10,617 = 668,149) P10-7 Interest: $1,000,000 * 10% = $100,000 Present Value: $1,000,000 * 0.5674 = 567,400 $100,000 * 3.6048 = 360,480 $927,880 2006 2007 Interest XP $111,346 $112,707 (927,880 * 12% = 111,346) ([927,880 + (111,346 100,000)] * 12% = 112,707) Cash Paid $100,000 $100,000 Bonds Payable $939,226 $951,933 (927,880 + 11,346 = 939,226) (939,226 + 12,707 = 951,933) DEBT EQUITY = total liabilities / shareholders equity = 233,471 / 146,168 = 1.597 TIE RATIO = (net income + interest) / interest = (63,375 + 3,480) / 3,480 = 19.211...
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4 - (657,532 + 10,617 = 668,149) P10-7 Interest: $1,000,000...

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