HOMEWORK solutions 10b

HOMEWORK solutions 10b - $945,000 inflow in financing...

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HOMEWORK solutions: Ch. 10, part b E10–9. Computations: Interest: $800,000 x 8% = $ 64,000 Present value: $800,000 x 0.4224 = 337,920 $ 64,000 x 6.4177 = 410,733 Issue price = $748,653 Req. 1 January 1: Cash (+A). .............................................................................. 748,653 Discount on Bonds Payable (+XL, -L). ................................... 51,347 Bonds Payable (+L). ........................................................... 800,000 Req. 2 December 31: Bond Interest Expense (+E, -SE) ($748,653 x 9%) . ............. 67,379 Discount on Bonds Payable (-XL, +L). ............................... 3,379 Cash (-A). ............................................................................ 64,000 Req. 3 December 31, 2006: Income statement: Bond interest expense $ 67,379 Balance sheet: Long-term Liabilities Bonds payable $800,000 Less: Unamortized discount ($51,347 – $3,379) 47,968 $752,032 E10–22. 1. Impacts SCF : report
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Unformatted text preview: $945,000 inflow in financing section 2. Does not impact SCF 3. Impacts SCF : report $58,000 payment in operating activities section 4. Impacts SCF : report $935,000 payment in financing section P105. 1. Computation of the amount of the bond liability when issued: $400,000 x .4632 = $185,280 $ 24,000 x 6.7101 = 161,042 Issue Price $346,322 2. Computation of interest expense recorded on December 31, 2006: $346,322 x 8% = $27,706 3. Managers are normally relatively indifferent between the straight-line and effective- interest methods. The two methods typically produce very similar financial results. In such cases, most managers would select the method that is simpler to use, which would be the straight-line method. 4. Date Debt-to-Equity Times-Interest-Earned Issue date Increase No effect Interest payment date Increase Decrease...
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This note was uploaded on 05/29/2008 for the course BSAD 20B taught by Professor Bruce during the Spring '08 term at UC Riverside.

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HOMEWORK solutions 10b - $945,000 inflow in financing...

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