Ch 9 Inclass problems.doc

Ch 9 Inclass problems.doc - Chapter 9-1 Problem 1...

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Chapter 9 - 1 - Problem 1: Installment notes. On January 1, 2015 , Julee Enterprises borrows $ 30,000 to purchase a new Toyota Highlander by agreeing to a 6%, 4-year note with the bank. The market rate is 6%. Payments of $ 704.55 are due at the end of each month with the first installment due on January 31 , 2015. 1. Record the issuance of the note payable. Jan 1 Cash 30,000 Notes Payable 30,000 2. Record the first two monthly payments. January 31, 2015 Interest Expense 150 Notes Payable 554.55 Cash 704.55 February 28, 2015 Interest Expense 147.23 Notes Payable 557.32 Cash 704.55 ( Constant) ( Carrying value*Market rate) (2*3) (Prior Carry Val – 4) Date: Cash Paid Interest Expense Decrease in Carrying Value Carrying Val Jan 1 30,000 Jan 31 704.55 150 554.55 29,445.45 Feb 28 704.55 147.23 557.32 29,442.68 Problem 2: Bonds issued at par On January 1, 2015, Ripstick Park issues $800,000 of 8% bonds, due in ten years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 8%, the bonds will issue at $800,000.
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