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Mitchell Boehm

Intermediate Accounting
P14-2
A)
Present value of principal:
2,000,000 * PV(10,10%)
2,000,000*
0.38554
771,080
Present value of interest:
210,000*
PV of an ordinary annuity(10,10%)
210,000*
6.14457
1,290,360
Carrying value of bond:
2,061,440
1/1/2013 Cash
Unamortized bond issue costs
Premium on bonds payable
Bonds payable
To record issuance of bonds
B)
Effective interest rate
Stated interest rate
Carrying value

Date
1/1/2013
1/1/2014
1/1/2015
1/1/2016
1/1/2017

Cash Paid
210,000
210,000
210,000
210,000

2,011,440
50,000

10.0%
10.5%
2,061,440
Interest
Expense
206,144
205,758
205,334
204,868

Premium
Amortized
3,856
4,242
4,666
5,132

C)
Carrying amount as of 1/1/2016
Less: Amortization of bond premium
Carrying amount as of 7/1/2016
Reacquisition price
Less: Carrying amount as of 7/1/2016, half of bonds

Unamortized bond issue costs, half of bonds
Loss on redemption of bonds

Balance of
Premium on Bonds
Payable
57,584
57,198
56,774
56,307

Carrying
Value
2,061,440
2,057,584
2,053,342
2,048,676
2,043,544

2,048,676
2,566.19
2,046,110
1,065,000
1,023,055
41,945
16,250
58,195

Bonds Payable Premium on bonds payable Loss on redemption of bonds Unamortized bond issue costs Cash Entry to record early bond redemption Interest expense Premium on bonds payable Cash 1.065.055 58.283 52.000 23.217 1.000 51.250 1.195 16.000.500 .

000.000 5.000 5.000 5.000 5.000 5.000 15.000 5.000 5.000 10.000 5.000 .000 35.61.440 2.000 30.000 45.000 50.000 20.000 40.000 5.000 25.000 5.000 Balance of Bond Issue Cost Unamortized Bond Amortization Issue Costs 5.

Check .

or discount existing at the origination or acquisition of the loan. or to give notice of its intention to demand. Furthermore. the circums shall be disclosed. any caption representing the combination of stockholders' equity only subordinated debts must be deleted. is included as a long-term liability in the disclosure of debt maturities).CE14-1 A) Callable obligation: An obligation is callable at a given date if the creditor has the right a date to demand. if applicable) from the date of an entity's balance sheet. that is. . D) Effective-interest rate: The rate of return implicit in the loan. repayment of the obligation o to it by the debtor. If a covenant violation occurs that would otherwise give the lender the right to call the debt. a lender m waive its call right arising from the current violation for a period CE14-4 Subordinated debt may not be included in the stockholders' equity section of the balance s Any presentation describing such debt as a component of stockholders' equity must be eliminated. CE14-3 Some long-term loans require compliance with certain covenants that must be met on a quarterly or semiannu basis. B) Imputed Interest Rate: The interest rate that results from a process of approximation (or imputation) required when the present value of a note must be estimated because an established exchange price is not determinable and the note has no ready market. CE14-2 If an obligation under paragraph 470-10-45-11(b) is classified as a long-term liability (or. premium. in the case of an unclassified balance sheet. the contractual inte rate adjusted for any net deferred loan fees or costs. C) Long-term obligation: Long-term obligations are those scheduled to mature beyond one (or the operating cycle.

at is. d to mature beyond one year alance sheet. the contractual interest discount existing at the bility (or. a lender may section of the balance sheet.e creditor has the right at that yment of the obligation owed cess of approximation (or imated because an o ready market. in the case of an debt maturities). the circumstances et on a quarterly or semiannual ht to call the debt. ders' equity must be n of stockholders' equity and .