FINAL EXAM IN IA-2 ANSWER KEY

Comprehensive Problems

Problem 1-4
Principal Interest Total Payment Pv Factor Present Value
1,200,000 60,000.00 1,260,000 0.8929 1,125,054.00
400,000 24,000.00 424,000 0.7972 338,012.80
400,000 12,000.00 412,000 0.7118 293,261.60
1,756,328

Date Interest Interest Expense Discount on NP Principal Carrying Amount

1,756,328
2018 60,000 210,759 (150,759) 1,200,000 707,088
2019 24,000 84,851 (60,851) 400,000 367,938
2020 12,000 44,079 (32,079) 400,000 -

Question 4
Principal payable at 2018 400,000
Less: Discount in NP (60,851)
Current liab at 2018 339,149

1.D 2.D 3.C 4. C

Problem 5-8

The carrying amount of the note on initital recognition is equal to its cash price equivalent of P994,760.

Amotization Table @ 10%

Principal Interest Present
Amortization
Payment Expense Value
Jan-18 994,760.00
Dec-18 400,000.00 99,476.00 300,524.00 694,236.00
2019 400,000.00 69,423.60 330,576.40 363,659.60
2020 400,000.00 36,365.96 363,634.04 -

5.C 6.A 7.A 8.B

Problem 9-14
9. Bonus
10.) Total Proceeds 3,000,000
Less: PV of the bonds without the coversion option
PV of Principal (3M x .5674) 1,702,281
PV of interest payments (300K x 3.6048) 1,081,433 2,783,714
Residual amount to equity 216,286 10.B

Amortization Table
Interest Interest Discount Present
Date
Payments Payments Amort. Value
Jan-17 2,783,714
Dec-17 300,000.00 334,045.68 (34,045.68) 2,817,759.68
Dec-18 300,000.00 338,131.16 (38,131.16) 2,855,890.84

11.) Fair Value using the current rate 1,537,969.00

Less: Carrying amount (2,855,890 x 1/2) 1,427,945.42
Loss on Settlement of liability 110,023.58 11. B

Present value using 9% for 3 periods

Present Value of Principal (1.5M x .07722) 1,158,275.00
Present Value of Interest payments (150K x 2.5313) 379,694.00
1,537,969.00

12.) Retirement Price 1,600,000.00

less: Fair Value of liability using current rate 1,537,969.00
Decrease in Equity 62,031.00 12. C

13.) Interest expense is 338,131 based on the amortization table above. 13. D

14.) Shares to be issued based on amended terms (1.5M/400) 3,750

Less: Shares to be issued based on original terms (1.5M/500) 3000
Incremental Shares 750
Multiplied by: Fair Value 420
Debt settlement expense 315,000.00 14.D
Problem 15-19

Notes Payable A
Interest
Principal Payment Carrying Amount
Expense
1-May-17 2,800,000.00
17-Dec-21 224,000.00 2,800,000.00
1-May-18 112,000.00 700,000.00 2,100,000.00
1-Dec-18 168,000.00 2,100,000.00
1-May-19 84,000.00 700,000.00 1,400,000.00
1-Dec-19 112,000.00 1,400,000.00
1-May-20 56,000.00 700,000.00 700,000.00
1-Dec-20 56,000.00 700,000.00
28,000.00 700,000.00 -

Current Portion 700,000.00

Non-current portion 1,400,000.00

Notes Payable B 2,000,000.00 Refinanced to long-term, automatic non-current

Notes Payable C 1,518,650.00

Amortization of Note C

Principal Interest
Amortization Carrying Amount
Payment Expense
Jan-18 1,518,650.00
Dec-18 500,000.00 182,238.00 317,762.00 1,200,888.00
Dec-19 500,000.00 144,106.56 355,893.44 844,994.56
Dec-20 500,000.00 101,399.35 398,600.65 446,393.91
Dec-21 500,000.00 53,567.27 446,432.73 -

Current Portion 355,893.44

Non-current portion 844,994.56

15.) Capilization of Notes Payable (500K x 3.0373) 1,518,650.00 A

16.) Non-current liabiliites
Note A 1,400,000.00
Note B 2,000,000.00
Note C 844,994.56 4,244,994.56 B
17.) Current Liabilities
Note A 700,000.00
Note B 0
Note C 355,893.44 1,055,893.44 B
18.) Accrued Interest
Note A 168,000.00
Note B -
Note C - 168,000.00 B
19.) Interest expense
Note A 112,000.00
168,000.00
Note B 200,000.00
Note C 182,238.00 662,238.00 C

Problem 20-22 - BONUS

Problem 22-25
22.) PV of lease payments (1M x 6.145) + 200k 6,345,000.00 B
22.) ROU Asset over the leasehold property life or leaseterm, whichever is shorter
(6,345,000 / 10) 634,500 B
23.) (6,145,000 - 385,500) 5,759,500.00 C

THEORIES
26 C 35 C
27 C 36 C
28 C 37 D
29 D 38 A
30 B 39 C
31 D 40 D
32 D 41 C
33 A 42 C
34 A

TRUE OR FALSE
43 FALSE 47 FALSE
44 FALSE 48 FALSE
45 TRUE 49 TRUE
46 TRUE 50 FALSE