Week_6_homework

Week_6_homework - SOLUTIONS TO EXERCISES EXERCISE 16-1...

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SOLUTIONS TO EXERCISES EXERCISE 16-1 (15–20 minutes) 1.Cash ($10,000,000 X .99). ....................................... 9,900,000 Discount on Bonds Payable. .................................. 100,000 Bonds Payable. ...................................................... 10,000,000 Unamortized Bond Issue Costs. ............................ 70,000 Cash. ...................................................................... 70,000 2.Cash. ........................................................................ 9,800,000 Discount on Bonds Payable. .................................. 600,000 Bonds Payable. ...................................................... 10,000,000 Paid-in Capital—Stock Warrants. ...................... 400,000 Value of bonds plus warrants ($10,000,000 X .98) $9,800,000 Value of warrants
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(100,000 X $4) 400,000 Value of bonds $9,400,000 3.Debt Conversion Expense. ..................................... 75,000 Bonds Payable. ........................................................ 10,000,000 Discount on Bonds Payable. ................................. 55,000 Common Stock. ..................................................... 1,000,000 Paid-in Capital in Excess of Par. ......................... 8,945,000* Cash. ...................................................................... 75,000 *[($10,000,000 – $55,000) – $1,000,000] EXERCISE 16-3 (10–15 minutes) Conversion recorded at book value of the bonds: Bonds Payable. .................................................................. 400,000 Premium on Bonds Payable. ............................................ 6,000 Preferred Stock (400 X 20 X $50). ............................... 400,000 Paid-in Capital in Excess of Par- Preferred Stock. ........................................................ 6,000
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EXERCISE 16-6 (25–35 minutes) (a)December 31, 2010 Bond Interest Expense. .................................................... 117,000 Premium on Bonds Payable ($60,000 X 1/20). .......................................................... 3,000 Cash ($3,000,000 X 8% X 6/12). .................................... 120,000 (b)January 1, 2011 Bonds Payable. .................................................................. 600,000 Premium on Bonds Payable. ............................................ 9,600 Common Stock [8 X $100 X ($600,000/$1,000)]. ................................ 480,000 Paid-in Capital in Excess of Par. ................................... 129,600 Total premium ($3,000,000 X .02) $60,000 Premium amortized ($60,000 X 2/10) 12,000 Balance $48,000
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Bonds converted ($600,000 ÷ $3,000,000) 20% Related premium ($48,000 X 20%) 9,600
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EXERCISE 16-6 (Continued) (c) March 31, 2011 Bond Interest Expense. .................................................... 11,700 Premium on Bonds Payable ($9,600 ÷ 8 years) X 3/12. ............................................ 300 Bond Interest Payable ($600,000 X 8% X 3/12). ............................................. 12,000 March 31, 2011 Bonds Payable. .................................................................. 600,000
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This note was uploaded on 06/11/2011 for the course ACC 551 taught by Professor Kennethmayberry during the Spring '11 term at DeVry Buckhead.

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Week_6_homework - SOLUTIONS TO EXERCISES EXERCISE 16-1...

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