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Dita Eka Nur Sakina - Tugas P14

The bonds were sold at a discount of $5,651, as evidenced by the January 1, 2004 book value of $94,349, which is less than the maturity value of $100,000 in 2013. The stated rate is 11% but the effective rate is 12% due to the discount. On January 1, 2009, $94,349 cash was received and bonds payable was recorded. Interest expense of $11,322 was recorded on December 31, 2009 along with interest payable. On January 1, 2016, interest payable of $11,000 was paid in cash, closing out the interest payable account.

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51 views8 pages

Dita Eka Nur Sakina - Tugas P14

The bonds were sold at a discount of $5,651, as evidenced by the January 1, 2004 book value of $94,349, which is less than the maturity value of $100,000 in 2013. The stated rate is 11% but the effective rate is 12% due to the discount. On January 1, 2009, $94,349 cash was received and bonds payable was recorded. Interest expense of $11,322 was recorded on December 31, 2009 along with interest payable. On January 1, 2016, interest payable of $11,000 was paid in cash, closing out the interest payable account.

Uploaded by

Dita Ens
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SOLUTIONS:

A. The bonds were sold at a discount of $5,651. Evidence of the discount is the January 1, 2004 book va
maturity value of $100,000 in 2013.

B. The stated rate is 11% ($11,000 ÷ $100,000). The effective rate is 12% ($11,322 ÷ $94,349).

DATE DESCRIPTION REF DEBIT


C. 1-Jan-09 Cash $ 94,349
Bonds Payable

D. 31-Dec-09 Interest Expense $ 11,322


Bonds payable
Interest Payable

E 1-Jan-16 Interest Payable $ 11,000


Cash
(Interest Payment)

31-Dec-16 Interest Expense $ 11,712


Bonds Payable
Interest Payable
iscount is the January 1, 2004 book value of $94,349, which is less than the

is 12% ($11,322 ÷ $94,349).

CREDIT

$ 94,349

$ 322
$ 11,000

$ 11,000
$ 712
$ 11,000
SOLUTIONS:
A. Present value of the principal
$ 2,000,000 X 0.38554 (PV10, 10%)

Present value of the interest payments


$ 210,000 X 6.14457 PVOA10, 10%)

Present value ( selling price of the bounds)

*$2,000,000 X 10.5% = $210,000

Cash
Bonds Payable

Carrying
Interest
Cash Premium Amount of
(b) Date Expense
Paid Amortization Bonds

1/1/2009 - - - 2,061,440
1/1/2010 210,000 206,144 3,856 2,057,584
1/1/2011 210,000 205,576 4,242 2,053,342
1/1/2012 210,000 205,334 4,666 2,048,676
1/1/2013 210,000 204,868 5,132 2,043,544

(c) Carrying amount as of 1/1/12 2,048,676


Less: Amortization of bond premium
(5,132 ÷ 2) 2,566
Carrying amount as of 7/1/12 2,046,110

Reacquisition price 1,065,000


Carrying amount as of 7/1/12
($2,046,110 ÷ 2) - 1,023,055
Loss 41,945

Entry for accrued interest


Interest Expense ($204,868 X 1/2 X 1/2) 51,217
Bonds Payable 1,283
Cash ($210,000 X 1/2 X 1/2)

Entry for reacquisition


Bonds Payable 1,023,055
Loss on Extinguishment of Bonds 41,945
Cash

*Premium as of 7/1/12 to be written off


($2,046,110 – $2,000,000) X 1/2 = $23,055

The loss is reported as other income and expense.


$ 771,080

$ 1,290,360

$ 2,061,440

20,061,440
20,061,440
52,500

1,065,000

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