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Libby Solutions Ch 10

Libby Solutions Ch 10 - E101 1 2 3 4 5 6 7 Bond principal...

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E10–1. 1. Bond principal, par value, or face value 2. Par value or face value 3. Face value or par value 4. Stated rate, coupon rate, or contract rate 5. Debenture 6. Callable bonds 7. Convertible bonds E10–4. CASE A: $100,000 x 0.5835 ......................................................... $ 58,350 $8,000 x 5.2064 ............................................................. 41,651 Issue price (market and stated rate same) .................... $100,001 (at par; $1 rounding error) CASE B: $100,000 x 0.6651 ......................................................... $ 66,510 $8,000 x 5.5824 ............................................................. 44,659 Issue price (market rate less than stated rate) .............. $111,169 (at a premium) CASE C: $100,000 x 0.5132 ......................................................... $ 51,320 $8,000 x 4.8684 ............................................................. 38,947 Issue price (market rate more than stated rate) ............. $ 90,267 (at a discount)
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E10–9. Computations: Interest: $600,000 x 7.5% x 1/2 = $ 22,500 Present value: $600,000 x 0.7168 = 430,080 $ 22,500 x 6.6638 = 149,936 Issue price = $580,016 Req. 1 January 1: Cash (+A) ............................................................................... 580,016 Discount on Bonds Payable (+XL, -L) .................................... 19,984 Bonds Payable (+L) ............................................................ 600,000 Req. 2 June 30: Interest Expense* (+E, -SE) .................................................. 24,651 Discount on Bonds Payable (-XL, +L) ................................ 2,151 Cash (-A) ............................................................................. 22,500 *($580,016 x 8.5% x ½) Req. 3 June 30, 2011: Income statement: Interest expense $ 24,651 Balance sheet: Long-term Liabilities Bonds payable $600,000 Less: Unamortized discount ($19,984 – $2,151) 17,833 $582,167
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E10–11. Req. 1 Issue price: 1. Par, $300,000 – Carrying value at end of 1 year, $281,100 = $18,900 (unamortized discount for 9 remaining years).
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