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Hmmm

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Submitted By myungsoo
Words 4966
Pages 20
CHAPTER 2
NON-CURRENT LIABILITIES
PROBLEMS
2-1.

(Ruby Corporation)
At 8%
Bond issue price
Nominal interest for 2013
Interest expense for 2013
Premium/discount amortization in 2013
Bond carrying value at December 31, 2012
Nominal interest for 2014
Interest expense for 2014
Premium/discount amortization in 2014
Bond carrying value at December 31, 2014

5,405,725
250,000
216,229
33,771
5,371,954
500,000
428,351
71,649
5,300,305

At 12%
4,632,025
250,000
277,922
27,922
4,659,947
500,000
560,970
60,970
4,720,917

Computations:
At 8%
Issue price = (5,000,000 x 0.6756) + (250,000 x 8.1109)
= 3,378,000 + 2,027,725 = 5,405,725

Date

A
Interest
Paid

B
Interest
Expense

C
Premium
Amortization

06/30/13
12/31/13
06/30/14
12/31/14

250,000
250,000
250,000

216,229
214,878
213,473

33,771
35,122
36,527

A
B

=
=

D
Bond
Carrying Value
5,405,725
5,371,954
5,336,832
5,300,305

Face value x 5%
Carrying value, beg of year x 4%

At 12%
Issue price = (5,000,000 x 0.5584) + (250,000 x 7.3601)
= 2,792,000 + 1,840,025 = 4,632,025

Date

A
Interest
Paid

B
Interest
Expense

C
Discount
Amortization

D
Bond
Carrying Value

06/30/13
12/31/13
06/30/14
12/31/14

250,000
250,000
250,000

277,922
279,597
281,373

27,922
29,597
31,373

4,632,025
4,659,947
4,689,544
4,720,917

A
B
2-2.

=
=

Face value x 5%
Carrying value, beg of year x 6%

(Fire Company)
(a)

Issue price
Present value of face value
(4,000,000 x 0.6756)
Present value of interest payments (200,000 x 8.1109)
Issue price

P2,702,400
1,622,180
P4,324,580

Chapter 2 - Non-Current Liabilities



(b)

Amortization Table
Date
3/01/13
8/31/13
2/28/14
8/31/14
2/28/15

(c)
03/01/13

08/31/13

12/31/13

02/28/14

2-3.

Interest
Expense
172,983
171,903
170,779
169,610

Premium
Amortization
27,017
28,097
29,221
30,390

Cash
Bonds Payable
Premium on Bonds Payable

Bond Carrying
Value
4,324,580
4,297,563
4,269,466
4,240,245
4,209,855

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