Week_3_homework

Week_3_homework - EXERCISE 14-3 (1520 minutes) 1. Divac...

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EXERCISE 14-3 (15–20 minutes) 1. Divac Company: (a) 1/1/10 Cash. .............................................. ................................................... 300,0 00 Bonds Payable. ........................ 300,00 0 (b) 7/1/10 Interest Expense ($300,000 X 9% X 3/12). ............. 6,750 Cash. .......................................... 6,750 (c) 12/31/ 10 Interest Expense. .......................... 6,750 Interest Payable. ....................... 6,750 2. Verbitsky Company: (a) 6/1/10 Cash. .............................................. ................................................... 210,0 00
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Bonds Payable. ........................ 200,00 0 Interest Expense ($200,000 X 12% X 5/12). ....... 10,000 (b) 7/1/10 Interest Expense. .......................... 12,00 0 Cash ($200,000 X 12% X 6/12). ....... 12,000
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(c) 12/31/ 10 Interest Expense. .......................... 12,00 0 Interest Payable. ....................... 12,000 Note to instructor : Some students may credit Interest Payable on 6/1/10. If they do so, the entry on 7/1/10 will have a debit to Interest Payable for $10,000 and a debit to Interest Expense for $2,000. EXERCISE 14-6 (15–20 minutes) Schedule of Discount Amortization Straight-Line Method Year Cas h Pai d Intere st Expen se Disco unt Amor tized Carrying Amount of Bonds Jan. 1, 2010 $2,783,724. 00 Dec. 31, 2010 $300,0 00 $343,255 .20 $43,255.20* 2,826,979. 20 Dec. 31, 2011 300,00 343,255. 43,255.2 2,870,234.
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0 20 0 40 Dec. 31, 2012 300,00 0 343,255. 20 43,255.2 0 2,913,489. 60 Dec. 31, 2013 300,00 0 343,255. 20 43,255.2 0 2,956,744. 80 Dec. 31, 2014 300,00 0 343,255. 20 43,255.2 0 3,000,000. 00 *$43,255.20 = ($3,000,000 – $2,783,724) ÷ 5. EXERCISE 14-7 (15–20 minutes) The effective-interest or yield rate is 12%. It is determined through trial and error using Table 6-2 for the discounted value of the principal ($1,702,290) and Table 6-4 for the discounted value of the interest ($1,081,434); $1,702,290 plus $1,081,434 equals the proceeds of $2,783,724. (A financial calculator may be used to determine the rate of 12%.)
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EXERCISE 14-7 (Continued) Schedule of Discount Amortization Effective-Interest Method (12%) Year C a s h P ai d In te r e st E x p e n s e D is c o u n t A m o rt iz e d Carr yi n g A m o u n t o f B o n d s (1) (2) (3) (4) Jan. 1, 2010 $2,7 8 3, 7 2 4. 0 0 Dec. 31, $30 0, $334 ,0 $34, 0 2,81 7,
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2010 0 0 0 46 .8 8 4 6. 8 8 7 7 0. 8 8 Dec. 31, 2011 300, 0 0 0 338, 13 2. 51 38,1 3 2. 5 1 2,85 5, 9 0 3. 3 9 Dec. 31, 2012 300, 0 0 0 342, 70 8. 41 42,7 0 8. 4 1 2,89 8, 6 1 1. 8 0 Dec. 31, 2013 300, 0 0 0 347, 83 3. 42 47,8 3 3. 4 2 2,94 6, 4 4 5. 2 2 Dec. 31, 2014 300, 0 0 0 353, 55 4. 78 ** 53,5 5 4. 7 8 3,00 0, 0 0 0. 0 0
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*$334,046.88 = $2,783,724 X .12. **Rounded. EXERCISE 14-9 (20–30 minutes) (a) 1. June 30, 2010 Cash. ............................................. .................................................. 5,376,150.0
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Week_3_homework - EXERCISE 14-3 (1520 minutes) 1. Divac...

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