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Solution to Assignment #1

Solution to Assignment #1 - SOLUTION TO ASSIGNMENT#1...

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Page 1 of 4 SOLUTION TO ASSIGNMENT #1 Problem 1: 3/1/07 Cash ................................................................ 236,045 Bonds Payable ...................................... 236,045* *Maturity value of bonds payable \$250,000 Present value of \$250,000 due in 7 periods at 6% (\$250,000 X .66506) \$166,265 Present value of interest payable semiannually (\$12,500 X 5.58238) 69,780 Proceeds from sale of bonds \$236,045 Schedule of Bond Discount Amortization Date Cash Paid (5%) Interest Expense (6%) Discount Amortized Carrying Amount of Bonds 3/1/07 \$236,045 9/1/07 \$12,500 \$14,163 \$1,663 237,708 3/1/08 12,500 14,262 1,762 239,470 9/1/08 12,500 14,368 1,868 241,338 3/1/09 12,500 14,480 1,980 243,318

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Page 2 of 4 9/1/07 Interest Expense ......................................... 14,163 Bonds Payable (discount amort.) ..... 1,663 Cash ................................................... 12,500 12/31/07 Interest Expense (\$14,262 X 4/6) ............... 9,508 Bonds Payable (discount amort.) ..... 1,175 (\$1,762 X 4/6) Interest Payable (\$12,500 X 4/6) ....... 8,333 3/1/08 Interest Expense (\$14,262 X 2/6) ............... 4,754 Interest Payable .......................................... 8,333 Bonds Payable (discount amort.) ..... 587 (\$1,762 X 2/6) Cash ................................................... 12,500 9/1/08 Interest Expense ......................................... 14,368 Bonds Payable (discount amort.) ..... 1,868 Cash ................................................... 12,500 12/31/08 Interest Expense (\$14,480 X 4/6) .............. 9,653 Bonds Payable (discount amort.) ..... 1,320 (\$1,980 X 4/6) Interest Payable (\$12,500 X 4/6) ....... 8,333
Page 3 of 4 Problem 2: 6/1/07 Cash ................................................................ 638,780 Bonds Payable ......................................

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Solution to Assignment #1 - SOLUTION TO ASSIGNMENT#1...

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