Homework - Ch 14

Homework - Ch 14 - Exercise 14-11 1. Price of the bonds at...

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Exercise 14-11 1. Price of the bonds at January 1, 2006 Interest $22,500 ¥ x 6.46321 * = $145,422 Principal $500,000 x 0.67684 ** = 338,420 Present value (price) of the bonds $483,842 ¥ 4.5% x $500,000 * present value of an ordinary annuity of $1: n=8, i=5% ** present value of $1: n=8, i=5% 2. January 1, 2006 Cash (price determined above) . .......................... 483,842 Discount on bonds (difference) . ...................... 16,158 Bonds payable (face amount). ...................... 500,000 3. Amortization schedule Cash Effective Increase in Outstanding Interest Interest Balance Balance 4.5% x Face Amount 5% x Outstanding Balance Discount Reduction 483,842 1 22,500 .05 (483,842) = 24,192 1,692 485,534 2 22,500 .05 (485,534) = 24,277 1,777 487,311 3 22,500 .05 (487,311) = 24,366 1,866 489,177 4 22,500 .05 (489,177) = 24,459 1,959 491,136 5 22,500 .05 (491,136) = 24,557 2,057 493,193 6 22,500 .05 (493,193) = 24,660 2,160 495,353 7 22,500 .05 (495,353) = 24,768 2,268 497,621 8 22,500 .05 (497,621) = 24,879* 2,379 500,000 180,000 196,158 16,158 * rounded.
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4. June 30, 2006 Interest expense (5% x $483,842) . ...................... 24,192 Discount on bonds payable (difference) . ..... 1,692 Cash (4.5% x $500,000) . ............................... 22,500 5. December 31, 2009 Interest expense (5% x $497,621) . ...................... 24,879* Discount on bonds payable (difference) . ..... 2,379 Cash (4.5% x $500,000) . ............................... 22,500 Bonds payable ..................................................... 500,000 Cash . ......................................................... 500,000 * rounded value from table
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Homework - Ch 14 - Exercise 14-11 1. Price of the bonds at...

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