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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 P10–5. 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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HOMEWORK solutions 10b - \$945,000 inflow in financing...

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