ch14-5th_part_ii_outline_answers

ch14-5th_part_ii_outline_answers - DEBT INSTRUMENT EXAMPLES...

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DEBT INSTRUMENT EXAMPLES 1. Alpha sold and issued to Beta $200,000, 8% (payable semiannually on June 30 and December 31) three year bonds. The bonds were dated and sold on January 1, 2004 at a market interest rate of 10%. The accounting period for each company ends on December 31. EFFECTIVE INTEREST AMORTIZATION Date Interest Expense/Revenue @ Market Rate- 5% Cash Interest @ Stated Rate- 4% Discount Amortization BV of Debt 1/1/04 189,850 6/30/04 9493 8000 1493 191,343 12/31/04 9567 8000 1567 192,910 6/30/05 9646 8000 1646 194,556 12/31/05 9728 8000 1728 196,284 6/30/06 9814 8000 1814 198,098 12/31/06 9902 8000 1902 200,000 STRAIGHT-LINE AMORTIZATION Date Interest Expense/Revenue= Cash Interest + Discount Amoritzation Cash Interest @ Stated Rate- 4% Discount Amortization = 10150/6 BV of Debt 1/1/04 189,850 6/30/04 9692 8000 1692 191,542 12/31/04 9692 8000 1692 193,234 6/30/05 9692 8000 1692 194,926 12/31/05 9692 8000 1692 196,618 6/30/06 9692 8000 1692 198,310 12/31/06 9692 8000 1692 200,000 1
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2. Gamma sold and issued to Delta $200,000, 8% (payable semiannually on
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This note was uploaded on 11/09/2010 for the course ACCT 301 taught by Professor Lynn during the Spring '10 term at University of Baltimore.

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ch14-5th_part_ii_outline_answers - DEBT INSTRUMENT EXAMPLES...

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