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ch14AdditionalAnswers - CHAPTER 14 Long-Term Liabilities...

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Unformatted text preview: CHAPTER 14 Long-Term Liabilities EXERCISE 14-2 (a) Discount on Bonds Payable—Contra account to bonds payable on balance sheet. (b) Interest expense (credit balance)—Reclassify to interest payable on balance sheet. (c) Unamortized Bond Issue Costs—Classified as “Other Assets” on balance sheet. (d) Gain on repurchase of debt—Classify as part of other gains and losses on the income statement. (e) Mortgage payable—Classify one-third as current liability and the remainder as long-term liability on balance sheet. (f) Debenture bonds—Classify as long-term liability on balance sheet. (g) Premium on bonds payable—Classify as adjunct account to Bonds Payable on balance sheet. (h) Notes payable—Classify as long-term liability on balance sheet. (i) Income bonds payable—Classify as long-term liability on balance sheet. EXERCISE 14-5 (a) 1/1/11 Cash ($800,000 X 102%)........................... 816,000 Bonds Payable................................. 800,000 Premium on Bonds Payable........... 16,000 (b) 7/1/11 Interest Expense ($816,000 X 9.7705% X 1/2)................... 39,864 Premium on Bonds Payable.................... 136 Cash ($800,000 X 10% X 6/12)............... 40,000 (c) 12/31/11 Interest Expense ($815,864 X 9.7705% X 1/2)................. 39,857 Premium on Bonds Payable.................. 143 Interest Payable............................ 40,000 Carrying amount of bonds at July 1, 2011: Carrying amount of bonds at January 1, 2011 $816,000 Amortization of bond premium ($40,000 – $39,864) (136 ) Carrying amount of bonds at July 1, 2011 $815,864 EXERCISE 14-9 (a) 1. June 30, 2010 Cash................................................... ............................................................ 5,376,150.00 Bonds Payable........................ 5,000,000.00 Premium on Bonds Payable. . 376,150.00 2. December 31, 2010 Interest Expense ($5,376,150.00 X 12% X 6/12)........ 322,569.00 Premium on Bonds Payable............ 2,431.00 Cash ($5,000,000 X 13% X 6/12).... 325,000.00 3. June 30, 2011 Interest Expense [($5,376,150.00 – $2,431.00) X 12% X 6/12]............................... 322,423.14 Premium on Bonds Payable............ 2,576.86 Cash.......................................... 325,000.00 4. December 31, 2011 Interest Expense [($5,376,150.00 – $2,431.00 – $2,576.86) X 12% X 6/12]............. 322,268.53 Premium on Bonds Payable............ 2,731.47 Cash.......................................... 325,000.00 EXERCISE 14-9 (Continued) (b) Long-term Liabilities: Bonds payable, 13% (due on June 30, 2030)...... $5,000,000.00 Premium on Bonds Payable*............................... 368,410.67 Book value of bonds payable.............................. $5,368,410.67 *($376,150) – ($2,431.00 + $2,576.86 + $2,731.47) = $368,410.67 (c) 1. Interest expense for the period from January 1 to June 30, 2011 from (a) 3...... $322,423.14 Interest expense for the period from July 1 to December 31, 2011 from (a) 4.... 322,268.53 Amount of bond interest expense...
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This note was uploaded on 04/14/2010 for the course TOBIN 630 taught by Professor Alan during the Fall '10 term at Adams State University.

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ch14AdditionalAnswers - CHAPTER 14 Long-Term Liabilities...

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