Mgmt 200 Assignment Soln 4-5-10

# Mgmt 200 Assignment Soln 4-5-10 - 343 \$ 9,657 Problem 10-3...

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Management 200 – Introductory Financial Accounting– Spring 2010 Krannert School of Management - Purdue University Solutions to class assignment for April 5, 2010 Problem 10-2 Amortization Of Discount 1. Discount Amortization Effective Interest Method of Amortization Col. 1 Col. 2 Col. 3 Col. 4 Cash Interest Discount Carrying Date Interest Expense Amortized Value 10% 12% Col. 2 – Col. 1 01/01/08 9,275 12/31/08 1,000 1,113 113 9,388 12/31/09 1,000 1,127 127 9,515 12/31/10 1,000 1,142 142 9,657 12/31/11 1,000 1,159 159 9,816 12/31/12 1,000 1,184 * 184 10,000 Totals 5,000 5,725 725 *Amount needed to bring carrying value to face value. 2. Interest expense = \$ 5,725 Cash interest payment = 5,000 Discount amortized = \$ 725 3. 2010 Dec. 31 Interest Expense 1,142 Discount on Bonds Payable 142 Cash 1,000 To record interest and amortize discount. Bonds payable \$ 10,000 Less: Discount on bonds payable

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Unformatted text preview: 343 \$ 9,657 Problem 10-3 Amortization Of Premium 1. Premium Amortization Effective Interest Method of Amortization Col. 1 Col. 2 Col. 3 Col. 4 Cash Interest Premium Carrying Date Interest Expense Amortized Value 10% 8% Col. 2 – Col. 1 01/01/08 10,803 12/31/08 1,000 864 136 10,667 12/31/09 1,000 853 147 10,520 12/31/10 1,000 842 158 10,362 12/31/11 1,000 829 171 10,191 12/31/12 1,000 809 * 191 10,000 Totals 5,000 4,197 803 *Amount needed to bring carrying value to face value. 2. Interest expense = \$ 4,197 Cash interest payment = 5,000 Premium amortized = \$ 803 3. 2010 Dec. 31 Interest Expense 842 Premium on Bonds Payable 158 Cash 1,000 To record interest and amortize premium. Bonds payable \$ 10,000 Plus: Premium on bonds payable 362 \$ 10,362...
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## This note was uploaded on 05/25/2010 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue University.

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Mgmt 200 Assignment Soln 4-5-10 - 343 \$ 9,657 Problem 10-3...

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