Advantages and Disadvantages of Communication Technology

CHAPTER 15 Long-Term Liabilities ANSWERS TO QUESTIONS 1. (a) long-term liabilities argon obligations that ar expected to be paying after one course of study. Examples include confiscates, semipermanent notes, and take away obligations. (b) bond certificates ar a model of enkindle-bearing notes account collectable used by corpoproportionns, universities, and g everywherenmental agencies. 2. (a) The major advantages are (1) sellowner everyplacecome is not affected bewilderholders do not become voting rights, so reliable air-takingholders retain full control of the comp apiece. (2) Tax savings result confiscate certificate pursuance is deductible for measure purposes dividends on deport are not. 3) bread per persona may be higheralthough bond take outlay leave alone muffle net income, earnings per section on unwashed stock will oft be higher under bond financing because no additional shares of vernacularalty stock are issued. (b) The major disadvanta ges in using bonds are that entertain essentialiness be paying(a) on a semestral basis and the of import ( grammatical case jimmy) of the bonds must be paying at out-of-pocket assignment troth. 3. (a) Secured bonds have specific assets of the issuer pledged as collateral. In contrast, unsecured bonds are issued against the general book of facts of the borrower. These bonds are c all tolded debenture bonds. (b) Term bonds rise at a single contract future date.In contrast, in series(p) bonds mature in installments. (c) Registered bonds are issued in the name of the owner. In contrast, immune carrier (coupon) bonds are not registered. Holders of bearer bonds must send in coupons to forgather interest pays. (d) transformable bonds may be change overed into common stock at the bondholders pick. Callable bonds are subject to solitude at a utter buck get prior to maturity at the pickax of the issuer. 4. (a) Face care for is the gist of principal cod at the m aturity date. (b) The contractual interest reckon is the govern used to determine the nitty-gritty of silver interest the borrower pays and the investor receives.This point is also called the verbalize interest array because it is the rate stated on the bonds. (c) A bond indenture is a legal enrolment that sets frontwards the terms of the bond issue. (d) A bond certificate is a legal document that indicates the name of the issuer, the panorama apprise of the bonds, the contractual interest rate and maturity date of the bonds. 5. The two major obligations incurred by a political party when bonds are issued are the interest payments cod on a cessationic basis and the principal which must be paid at maturity. 6. slight than.Investors are required to pay more than the face value whence, the trade interest rate is less than the contractual rate. 7. $28,000. $800,000 X 7% X 1/2 year = $28,000. copyright 2010 buttocks Wiley & Sons, Inc. Weygandt, accounting system Prin ciples, 9/e, Solutions manual (For t from all(prenominal) oneer exercise Only) 15-1 Questions Chapter 15 (Continued) *8. $860,000. The balance of the confede rations collectable account electronegative the balance of the fire on chemical bonds due account (or plus the balance of the exchange reward on deposits account collectable account) equals the carrying value of the bonds. *9. Debits attribute gravels due (for the face value) and subsidy on flummoxs account payable (for the unamortized balance). coin (for 97% of the face value) and Gain on pose repurchase (for the difference between the cash paid and the bonds carrying value). *10. A convertible bond permits bondholders to convert it into common stock at the option of the bondholders. (a) For bondholders, the conversion option gives an opportunity to utility if the food market price of the common stock increases substantially. (b) For the issuer, convertible bonds usually have a higher selling price and a l ower rate of interest than same debt securities without the conversion option. 11. No, Tim is not right. Each payment by Tim consists of (1) interest on the free balance of the add and (2) a decrement of loan principal. The interest decreases each period while the portion applied to the loan principal increases each period. *12. (a) A aim agreement is a contract in which the lessor gives the lessee the right to use an asset for a specified period in provide for one or more midweekly rental payments. The lessor is the owner of the property and the lessee is the tenant or tenant. (b) The two most common types of leases are operating(a) leases and capital leases. c) In an operating lease, the property is rented by the lessee and the lessor retains all ownership risks and responsibilities. A capital lease transfers substantially all the benefits and risks of ownership from the lessor to the lessee, so that the lease is in effect a purchase of the property. *13. This lease would be inform as an operating lease. In an operating lease, each payment is debited to Rent outgo. uncomplete a hired asset nor a lease financial obligation is capitalized. *14. In a capital lease agreement, the lessee discharges the present value of the lease payments as an asset and a indebtedness.Therefore, Rondelli Company would debit hired addition-Equipment for $186,300 and realization Lease financial obligation for the same measurement. *15. The record and the amount of each long-term liability should be presented in the balance airplane or in schedules in the come with notes to the statements. The notes should also indicate the interest rates, maturity dates, conversion privileges, and assets pledged as collateral. *16. Laura is plausibly indicating that since the borrower has the use of the bond proceeds over the term of the bonds, the borrowing rate in each period should be the same.The effective-interest manner results in a varying amount of interest disbursemen t but a constant rate of interest on the balance outstanding. Accordingly, it results in a soften matching of expenses with revenues than the straight-line order. When the difference between the straight-line regularity of amortization and the effective interest method is material, GAAP requires the use of the effective interest method. *17. Decrease. Under the effective-interest method the interest blossom per period is persistent by multiplying the carrying value of the bonds by the effective-interest rate.When bonds are issued 15-2 secure 2010 gutter Wiley & Sons, Inc. Weygandt, chronicle Principles, 9/e, Solutions manual(a) (For teacher affair Only) Questions Chapter 15 (Continued) at a premium, the carrying value decreases over the vitality of the bonds. As a result, the interest expense will also decrease over the life of the bonds because it is determined by multiplying the decreasing carrying value of the bonds at the beginning of the period by the effective-inte rest rate. *18. No, Tina is not right.The market price of any bond is a function of triplet factors (1) The dollar amounts to be genuine by the investor (interest and principal), (2) The length of time until the amounts are trustworthy (interest payment dates and maturity date), and (3) The market interest rate. *19. The straight-line method results in the same amortized amount being assigned to delight put down each interest period. This amount is determined by dividing the native bond give notice or premium by the human action of interest periods the bonds will be outstanding. *20. $28,000. involvement expense is the interest to be paid in cash less the premium amortization for the year. silver to be paid equals 8% X $400,000 or $32,000. do premium equals 5% of $400,000 or $20,000. Since this is to be amortized over 5 years (the life of the bonds) in equal amounts, the amortization amount is $20,000 ? 5 = $4,000. Thus, $32,000 $4,000 or $28,000 equals interest expense for 2010. 21. PepsiCo save (paid) $579 million of long-term debt. copyright 2010 prat Wiley & Sons, Inc. Weygandt, accountancy Principles, 9/e, Solutions Manual (For teacher wasting disease Only) 15-3 SOLUTIONS TO sketch achievementS BRIEF manage 15-1 get out personal credit line Outstanding shares (b) Earnings per share (a) ? (b) $700,000 0 700,000 210,000 $490,000 $700,000 60,000 540,000 162,000 $378,000 700,000 $0. 70 Income out front interest and taxes vex ($2,000,000 X 8%) Income before income taxes Income tax expense (30%) utmost income (a) bring down constipate 500,000 $0. 76 terminal income is higher if stock is used. However, earnings per share is lower than earnings per share if bonds are used because of the additional shares of stock that are outstanding. BRIEF purpose 15-2 (a) Jan. 1 (b) July 1 (c) Dec. 31 15-4 bullion . amazes collectible (3,000 X $1,000) . 3,000,000 lodge intimacy spending . capital ($3,000,000 X 8% X 1/2). 20,000 marry busy get down . bandage interestingness payable ($3,000,000 X 8% X 1/2). 120,000 procure 2010 rear end Wiley & Sons, Inc. 3,000,000 120,000 Weygandt, write up Principles, 9/e, Solutions Manual 120,000 (For instructor rehearse Only) BRIEF arrange 15-3 (a) Jan. 1 (b) Jan. 1 specie ($2,000,000 X . 97). synthesis on alinements due.. adherences collectable . 1,940,000 60,000 notes ($2,000,000 X 1. 04).. Bonds account payable . tribute on Bonds collectible .. 2,080,000 2,000,000 2,000,000 80,000 BRIEF recitation 15-4 1. 2. 3. Jan. 1 July 1Sept. 1 specie (1,000 X $1,000). Bonds account payable . 1,000,000 currency ($800,000 X 1. 02).. Bonds due . bounteousness on Bonds payable .. 816,000 silver ($200,000 X . 98) . fire on Bonds collectible.. Bonds collectable . 196,000 4,000 1,000,000 800,000 16,000 200,000 BRIEF forge 15-5 Bonds payable. harm on Bond buyback ($1,010,000 $940,000) . tax deduction on Bonds collectable . hard cash ($1,000,000 X ci%) .. procu re 2010 lavatory Wiley & Sons, Inc. 1,000,000 Weygandt, be Principles, 9/e, Solutions Manual 70,000 60,000 1,010,000 (For teacher commit Only) 15-5 BRIEF usage 15-6 (A) Semiannual divert block Issue accompaniment 1 Dec. 31 June 30 property Payment $48,145 (B) pertain write off (D) X 5% $30,000 (C) step-down of wind (A) (B) (D) Principal Balance (D) (C) $18,145 $600,000 581,855 cash in . owe Notes due 600,000 enkindle spending ..Mortgage Notes collectable . immediate payment 30,000 18,145 600,000 48,145 BRIEF ferment 15-7 1. 2. Rent disbursement interchange.. 80,000 undertake AssetBuilding . Lease Liability. 700,000 80,000 700,000 BRIEF turn 15-8 Long-term liabilities Bonds payable, due 2012 .. little Discount on bonds payable ..Notes payable, due 2015. Lease liability. radical long-term liabilities . 15-6 Copyright 2010 earth-closet Wiley & Sons, Inc. $500,000 45,000 $455,000 80,000 70,000 $605,000 Weygandt, news report Principles, 9/e, Solutions Man ual (For instructor Use Only) *BRIEF puzzle out 15-9 (b) i = 10% ? $10,000 0 1 2 3 4 5 6 7 8 Discount rate from send back 15 A-1 is . 46651 (8 periods at 10%). present tense value of $10,000 to be received in 8 periods discounted at 10% is therefore $4,665. 10 ($10,000 X . 46651). (b) = 8% ? 0 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 1 2 3 4 5 6 Discount rate from Table 15 A-2 is 4. 62288 (6 periods at 8%). Present value of 6 payments of $20,000 each discounted at 8% is therefore $92,457. 60 ($20,000 X 4. 62288). *BRIEF EXERCISE 15-10 (a) vex disbursal .. Discount on Bonds due bills .. 46,884 1,884 45,000 (b) please expense is greater than interest paid because the bonds sold at a discount which must be amortized over the life of the bonds.The bonds sold at a discount because investors demanded a market interest rate higher than the contractual interest rate. (c) spare-time activity expense increases each period because the bond carrying value increases each period. As the market interest rate is applied to this bond carrying amount, interest expense will increase. Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 15-7 *BRIEF EXERCISE 15-11 (a) Jan. 1 (b) July 1 Cash (. 96 X $5,000,000) . Discount on Bonds due .. Bonds collectible . ,800,000 200,000 Bond invade expense .. Discount on Bonds due ($200,000 ? 20) . Cash ($5,000,000 X 9% X 1/2) .. 235,000 5,000,000 10,000 225,000 *BRIEF EXERCISE 15-12 (a) Cash (1. 02 X $3,000,000).. Bonds payable. agio on Bonds collectible 3,060,000 (b) Bond cheer Expense . gift on Bonds account payable ($60,000 ? 10). Cash ($3,000,000 X 10% X 1/2) .. 144,000 15-8Copyright 2010 John Wiley & Sons, Inc. 3,000,000 60,000 6,000 Weygandt, Accounting Principles, 9/e, Solutions Manual 150,000 (For Instructor Use Only) SOLUTIONS FOR DO IT REVIEW EXERCISES DO IT 15-1 1. 2. 3. 4. 5. False. Mortgage bonds and sinking fund bonds are both example s of secured bonds. False. Convertible bonds can be converted into common stock at the bondholders option callable bonds can be retired by the issuer at a set amount prior to maturity. True. True. True. DO IT 15-2 (a) Cash Bonds account payable .. gift on Bonds Payable.. (To record sales event of bonds at a premium) 312,000 300,000 12,000 (b) Long-term liabilities Bonds payable Plus amplitude on bonds payable $300,000 12,000 $312,000 DO IT 15-3 going away on Bond Redemption. Bonds Payable Discount on Bonds Payable Cash (To record repurchase of bonds at 99)Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual 6,000 400,000 10,000 396,000 (For Instructor Use Only) 15-9 DO IT 15-4 Cash .. Mortgage Notes Payable. (To record mortgage loan) affair Expense Mortgage Notes Payable .. Cash (To record periodic payment on mortgage) 50,000 350,000 10,500* 7,357 17,857 *Interest expense = $350,000 X 6% X 6/12 DO IT 15-5 (a) Leased AssetEquipment Lease Liability. (To record leased asset and lease liability) 192,000 192,000 (b) The debt to total assets ratio = $1, ampere-second,000 ? $1,800,000 = 61%. This ratio means that 61% of the total assets were provided by creditors. The higher the contribution of debt to total assets, the greater the risk that the company may be unable to impact its maturing obligations. 15-10 Copyright 2010 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) SOLUTIONS TO EXERCISES EXERCISE 15-1 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. True. True. False. When seeking long-term financing, an advantage of result bonds over issuing common stock is that tax savings result. True. False. Unsecured bonds are also known as debenture bonds. False. Bonds that mature in installments are called serial bonds. True. True. True. True. EXERCISE 15-2 Plan One Issue Stock Income before interest and taxes Interest ($2,700,000 X 10%) Income before taxes Income tax expense ( 30%) Net income Outstanding sharesEarnings per share Plan Two Issue Bonds $800,000 800,000 240,000 $560,000 150,000 $3. 73 $800,000 270,000 530,000 159,000 $371,000 90,000 $4. 12 EXERCISE 15-3 (a) Jan. 1 (b) July 1 (c) Dec. 31 Cash.. Bonds Payable . 500,000 Bond Interest Expense . Cash ($500,000 X 10% X 1/2) 25,000 Bond Interest Expense . Bond Interest Payable . 25,000 Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual 500,000 25,000 25,000 For Instructor Use Only) 15-11 EXERCISE 15-4 (a) Jan. 1 (b) July 1 (c) Dec. 31 Cash .. Bonds Payable . 300,000 Bond Interest Expense .. Cash ($300,000 X 8% X 1/2) .. 12,000 Bond Interest Expense .. Bond Interest Payable . 12,000 300,000 12,000 12,000 EXERCISE 15-5 (a) Jan. 1 2010 Cash. Bonds Payable 400,000 400,000 (b) July 1 Bond Interest Expense.Cash ($400,000 X 9% X 1/2). 18,000 Bond Interest Expense. Bond Interest Payable 18,000 18,000 (c) Dec. 31 (d) Jan. 15-12 1 2020 Bonds Payable.. Cash .. Cop yright 2010 John Wiley & Sons, Inc. 18,000 400,000 Weygandt, Accounting Principles, 9/e, Solutions Manual 400,000 (For Instructor Use Only) EXERCISE 15-6 At 100 (a) (1) Cash .. 1,000,000 Bonds Payable 1,000,000 At 98 (2)Cash .. Discount on Bonds Payable .. Bonds Payable 980,000 20,000 1,000,000 At 103 (3) Cash .. 1,030,000 Bonds Payable 1,000,000 Premium on Bonds Payable.. 30,000 retreat of bonds at maturity (b) Bonds Payable .. Cash. 1,000,000 1,000,000 Retirement of bonds before maturity at 98 (c)Bonds Payable 1,000,000 Premium on Bonds Payable 9,000 Cash.. Gain on Bond Redemption . 980,000 29,000 Conversion of bonds into common stock (d) Bonds Payable .. Common Stock . Paid-in slap-up in Excess of equation harbor. Copyright 2010 John Wiley & Sons, Inc. 1,000,000 Weygandt, Accounting Principles, 9/e, Solutions Manual 300,000 700,000 (For Instructor Use Only) 15-13 EXERCISE 15-7 (a) (1) 2) Cash.. Discount on Bonds Payable .. Bonds Payable .. 485,000 15,000 500,000 Semiannual i nterest payments ($20,000* X 10) .. Plus Bond discount.. bestow toll of borrowing. $200,000 15,000 $215,000 *($500,000 X . 08 X 6/12) OR Principal at maturity Semiannual interest payments ($20,000 X 10).Cash to be paid to bondholders.. Cash received from bondholders Total cost of borrowing. (b) (1) (2) Cash.. Bonds Payable .. Premium on Bonds Payable . $500,000 200,000 700,000 485,000 $215,000 525,000 Semiannual interest payments ($20,000 X 10). Less Bond Premium. Total cost of borrowing. 500,000 25,000 $200,000 25,000 $175,000OR Principal at maturity Semiannual interest payments ($20,000 X 10). Cash to be paid to bondholders.. Cash received from bondholders Total cost of borrowing. 15-14 Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual $500,000 200,000 700,000 525,000 $175,000 (For Instructor Use Only) EXERCISE 15-8 (a) Jan. 1 (b) Jan 1 (c) July 1 Bond Interest Payable Cash 2,000 Bonds Payable expiration on Bond Redemption. Cash ($ 600,000 X 1. 04) 600,000 24,000 Bond Interest Expense . Cash ($1,000,000 X 9% X 1/2).. 45,000 72,000 624,000 45,000 EXERCISE 15-9 1. 2. 3. June 30 June 30 Dec. 31 Bonds Payable . Loss on Bond Redemption ($132,600 $117,500).. Discount on Bonds Payable ($130,000 $117,500) Cash ($130,000 X 102%) 130,000 Bonds Payable .Premium on Bonds Payable. Gain on Bond Redemption ($151,000 $147,000) Cash ($150,000 X 98%).. 150,000 1,000 Bonds Payable . Common Stock ($5 X 20* X 30) Paid-in Capital in Excess of Par Value .. 20,000 15,100 12,500 132,600 4,000 147,000 3,000 17,000 *($20,000 ? $1,000) Note As per the textbook, the market value of the stock is ignored in the conversion. Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 5-15 EXERCISE 15-10 Dec. 31 June 30 Dec. 31 2010 yield of Note Cash .. Mortgage Notes Payable. 2011 First Installment Payment Interest Expense ($240,000 X 10% X 6/12) Mortgage Notes Payable .. C ash. Second Installment Payment Interest Expense ($240,000 $8,000) X 10% X 6/12 Mortgage Notes Payable .. Cash. 240,000 240,000 12,000 ,000 20,000 11,600 8,400 20,000 EXERCISE 15-11 (a) January 1, 2010 Cash .. Mortgage Notes Payable .. 300,000 300,000 June 30, 2010 Interest Expense ($300,000 X 8% X 6/12).. Mortgage Notes Payable .. Cash .. 12,000 8,000 20,000 December 31, 2010 Interest Expense ($292,000 X 8% X 6/12).. Mortgage Notes Payable ..Cash .. 15-16 Copyright 2010 John Wiley & Sons, Inc. 11,680 8,320 Weygandt, Accounting Principles, 9/e, Solutions Manual 20,000 (For Instructor Use Only) EXERCISE 15-11 (Continued) (b) reliable $17,652 $20,000 ($283,680 X 8% X 6/12) + $20,000 ($275,027 X 8% X 6/12) Long-term $266,028 ($300,000 $8,000 $8,320) $17,652 EXERCISE 15-12 (a) Car Rental Expense. Cash (b) Jan. 1 500 Leased Asset-Equipment Lease Liability .. 4,606 500 74,606 EXERCISE 15-13 Long-term liabilities Bonds payable, due 2015 . $180,000 Add Premium on bonds payable .. 32,000 Lease liability .. Total long-term liabilities $212,000 89,500 $301,500 Note Bond Interest Payable is a current liability EXERCISE 15-14 (a) Total assets . Less Total liabilities Total stockholders equity . (b) Debt to total assets ratio $1,000,000 620,000 $ 380,000 Total liabilities $620,000 = = 62% Total assets $1,000,000 (c) Times interest earned ratio = Net income + Income tax expense + Interest expense Interest expense = Copyright 2010 John Wiley & Sons, Inc. $150,000 + $100,000 + $7,000 = 36. 7 times $7,000 Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 15-17 *EXERCISE 15-15 Present value of principal ($200,000 X . 61391) .. Present value of interest ($8,000 X 7. 72173) Market price of bonds. $122,782 61,774 $184,556 *EXERCISE 15-16 a) Jan. 1 (b) July 1 (c) Dec. 31 15-18 Cash . Discount on Bonds Payable . Bonds Payable Bond Interest Expense ($562,613 X 5%) Discount on Bonds Payable Cash ($600,000 X 9% X 1/2) . Bond Interest Expense ($562,613 + $1,131) X 5% Discount on Bonds Payable Bond Interest Payable Copyright 2010 John Wiley & Sons, Inc. 562,613 37,387 600,000 28,131 1,131 27,000 28,187 Weygandt, Accounting Principles, 9/e, Solutions Manual ,187 27,000 (For Instructor Use Only) Weygandt, Accounting Principles, 9/e, Solutions Manual *EXERCISE 15-16 (Continued) Copyright 2010 John Wiley & Sons, Inc. (b), (c) Semiannual Interest checks Issue date 1 2 (A) Interest to Be Paid (4. 5% X $600,000) 27,000 27,000 (B) Interest Expense to Be record (5% X Preceding Bond Carrying Value) (E X . 05) 28,131 28,187 (C) Discount amortisation (B) (A) 1,131 1,187 (D) Unamortized (E) Discount Bond (D) (C) Carrying Value 37,387 36,256 35,069 562,613 563,744 564,931 (For Instructor Use Only) 15-19 *EXERCISE 15-17 (a) Jan. (b) July 1 1 (c) Dec. 31 15-20Cash Premium on Bonds Payable.. Bonds Payable .. Bond Interest Expense ($318,694 X 5%).. Premium on Bonds Payable Cash ($300,000 X 11% X 1/2). Bond Interest Expense ($318 ,694 $565) X 5% .. Premium on Bonds Payable Bond Interest Payable .. Copyright 2010 John Wiley & Sons, Inc. 318,694 18,694 300,000 15,935 565 16,500 15,906 594 Weygandt, Accounting Principles, 9/e, Solutions Manual 6,500 (For Instructor Use Only) Weygandt, Accounting Principles, 9/e, Solutions Manual (B) Interest Expense (A) to Be Recorded (C) (D) Semiannual Interest to (5. 0% X Preceding Premium Unamortized (E) Interest Be Paid Bond Carrying Value) Amortization Premium Bond Periods (5. 5% X $300,000) (E X . 05) (A) (B) (D) (C) Carrying Value Issue date 1 2 16,500 16,500 15,935 15,906 565 594 18,694 18,129 17,535 318,694 318,129 317,535 *EXERCISE 15-17 (Continued) Copyright 2010 John Wiley & Sons, Inc. (b), (c) (For Instructor Use Only) 15-21 *EXERCISE 15-18 (a) Jan. 1 (b) July 1 (c) Dec. 31 (d) Jan. 1Cash ($400,000 X 103%) Premium on Bonds Payable. Bonds Payable . 412,000 Bond Interest Expense .. Premium on Bonds Payable ($12,000 X 1/40) . Cash ($400,000 X 9% X 1/2) .. 17,70 0 Bond Interest Expense. Premium on Bonds Payable . Bond Interest Payable 17,700 300 2030 Bonds Payable.. Cash .. 12,000 400,000 300 18,000 18,000 400,000 400,000 *EXERCISE 15-19 (a) Dec. 1 (b) June 30 (c) Dec. 31 (d) Dec. 31 15-22 2009 Cash. Discount on Bonds Payable . Bonds Payable 2010 Bond Interest Expense. Discount on Bonds Payable ($70,000 ? 20) . Cash ($800,000 X 11% X 1/2).. 2010 Bond Interest Expense. Discount on Bonds Payable .. Cash ($800,000 X 11% X 1/2).. 2019 Bonds Payable.. Cash .. Copyright 2010 John Wiley & Sons, Inc. 30,000 70,000 800,000 47,500 3,500 44,000 47,500 3,500 44,000 800,000 Weygandt, Accounting Principles, 9/e, Solutions Manual 800,000 (For Instructor Use Only) SOLUTIONS TO jobS PROBLEM 15-1A (a) May 1 (b) Dec. 31 2010 Cash.. Bonds Payable . Bond Interest Expense . Bond Interest Payable ($600,000 X 9% X 2/12) 600,000 600,000 9,000 9,000 (c) Current Liabilities Bonds Interest Payable.. $ Long-term Liabilities Bonds Payable, due 2015 . (d) May 1 e) No v. 1 (f) Nov. 1 2011 Bond Interest Payable Bond Interest Expense ($600,000 X 9% X 4/12) Cash 9,000 $600,000 9,000 18,000 27,000 Bond Interest Expense . Cash ($600,000 X 9% X 1/2).. 27,000 Bonds Payable Loss on Bond Redemption. Cash ($600,000 X 1. 02) 600,000 12,000 Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual 27,000 612,000 (For Instructor Use Only) 15-23 PROBLEM 15-2A (a) Jan. 2010 Cash ($500,000 X 1. 04) . Bonds Payable Premium on Bonds Payable . 520,000 500,000 20,000 (b) Current Liabilities Bond interest payable ($500,000 X 10% X 1/2) . Long-term Liabilities Bonds payable, due 2020. Add Premium on bonds payable . (c) Jan. 1 2012 Bonds Payable .. Premium on Bonds Payable . Loss on Bond Redemption Cash ($500,000 X 1. 05) . $ 25,000 $500,000 18,000 $518,000 500,000** 16,000** 9,000* 25,000 *($525,000 $516,000) 15-24 Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Us e Only) PROBLEM 15-3A (a) Semiannual Interest Period Cash Payment Issue Date 1 2 3 4 (b) Dec. 31 June 30 Dec. 31 $29,433 29,433 29,433 29,433 Interest Expense $16,000 15,463 14,904 14,323 Reduction of Principal Principal Balance $13,433 13,970 14,529 15,110 $400,000 386,567 372,597 358,068 342,958 2009 Cash . Mortgage Notes Payable 400,000 2010 Interest Expense ..Mortgage Notes Payable . Cash 16,000 13,433 Interest Expense .. Mortgage Notes Payable . Cash (c) 400,000 29,433 15,463 13,970 29,433 12/31/10 Current Liabilities Current portion of mortgage notes payable $ 29,639** Long-term Liabilities Mortgage notes payable, due 2019 $342,958** **($14,529 + $15,110) **($372,597 $14,529 $15,110) Copyright 2010 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 9/e, Solutions Manual (For Instructor Use Only) 15-25