Prob 14-5

# Cas h pay ment 45 fac e amount 1 2 3 4 5 6 7 8 4500

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + (4,500 + 404) 404) 404) 404) 404) 404) 404) 404) = = = = = = = = 36,000 Inc reas e in Balanc e \$3,232 ÷ 8 4,904 4,904 4,904 4,904 4,904 4,904 4,904 4,904 404 404 404 404 404 404 404 404 39,232 Outs tanding Balanc e 96,768 97,172 97,576 97,980 98,384 98,788 99,192 99,596 100,000 3,232 3. (effec tive interes t) Interes t ex pens e (5% × \$98,226) = 4,911 Cas h (4.5% × \$100,000) = 4,500 (s traight-line) Interes t ex pens e (\$4,500 + 404) = 4,904 Dis c ount on bonds pay able (\$3,232 ÷ 8) = 404 Cas h (4.5% × \$100,000) = 4,500 5. The amortiz ation s c hedule in requirement 1 gives us the pres ent value, whic h repres ents fair value s inc e the mark et rate s till is 10% . The outs tanding debt balanc e after the June 30, 2015, interes t pay ment (line 5) is the pres ent value at that time (\$98,637) of the remaining pay ments . Sinc e \$10,000 fac e amount of the bonds is 10% of the entire is s ue, we tak e 10% of the table amount to arrive at \$9,864. This c an be c onfirmed by c alc ulating the pres ent value: ezto.mhecloud.mcg r aw- hill.com/hm_accounting .tpx?todo= pr intviewSing le 4/5 2/25/14 Assig nment Pr int View Interes t Princ ipal \$450¥ × 2.72325* \$10,000 × 0.86384** Pres ent value (pric e) of the bonds = \$ 1,225 = 8,638 \$ 9,864 (rounded) ¥ 4. 5% × \$10, 000 *pres ent value of an ordinary annuit y of \$1: n = 3, i = 5% (PVA of \$1) **pres ent value of \$1: n = 3, i = 5% (PV of \$1) ezto.mhecloud.mcg r aw- hill.com/hm_accounting .tpx?todo= pr intviewSing le 5/5...
View Full Document

## This homework help was uploaded on 03/22/2014 for the course ACC 3000 taught by Professor He during the Fall '09 term at CUNY Baruch.

Ask a homework question - tutors are online