AFM 101 Classroom Solutions - Nov 14th Part B_1

AFM 101 Classroom Solutions - Nov 14th Part B_1 - E1115...

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E11–15 Principal: $1,000,000 x p n=3;i=9% (Table A.1; 0.7722). ............... $ 772,200 Interest: ($1,000,000 x 10%) x P n=3;i=9% (Table A.2; 2.5313). ... 253,130 Issue (sale) price. ...................................................................... $1,025,330 Req. 1 — Effective-interest amortization: Bond Payment Schedule Date Cash Payme nt Interes t Expens e Amorti zation of Premiu m Net Liability 1/1/2010 $1,025,330 12/31/2010 $ 100,000 $1,025,330 x 9% = $92,280 $7,720 1,017,610 12/31/2011 100,000 1,017,610x 9% = 91,585 8,415 1,009,195 12/31/2012 100,000 1,009,195x 9% = 90,827 3 9,195* 1,000,000 *This amount should be $9,173. It was adjusted upward by $22 because of rounding errors. This ensures that the net liability equals the face value of the bonds at maturity. Req. 2 2010 2011 2012 Item disclosed and related statement Interest expense (on the income statement) $ 92,280 $ 91,585 $ 90,827 Bonds payable (on the statement of financial position) 1,017,610 1,009,195 0 Interest payment (on the statement of cash flows)
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This note was uploaded on 12/19/2011 for the course AFM 101 taught by Professor Kennedy during the Fall '08 term at Waterloo.

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AFM 101 Classroom Solutions - Nov 14th Part B_1 - E1115...

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