1 date interest payment interest expense amortization present value

1/1/2001 5,773,129
12-31-2001 700,000.00 461,850 238,150 5,534,979
12-31-2002 700,000.00 442,798 257,202 5,277,778
12-31-2003 700,000.00 422,222 277,778 5,000,000

2 a. 8,600,000.00 cash 8,518,355.00

- 81,645.00 bonds payable
8,518,355.00 carrying amount premium

b. 8,600,000.00 bond price

- 8,000,000.00 bond face amount
600,000.00 premium
- 81,645.00 bond issue cost
518,355.00 net premium

c. date interest payment interest expense amortization present value

1/1/2001 8,518,355
12-31-2001 880,000.00 766,652 113,348 8,405,007
12-31-2002 880,000.00 756,451 123,549 8,281,458
12-31-2003 880,000.00 745,331 134,669 8,146,789
12-31-2004 880,000.00 733,211 146,789 8,000,000

12-31-2001 interest expense 766,652.00

premium 113,348.00
cash 880,000.00

3 a 9,105,022.00 cash 9,105,022.00

- 586,667.00 (8m x .11 x 8/12) bonds payable
8,518,355.00 carrying amoung premium
interest expense
interest expense in
dec 31, 2001
880,000.00
- 586,667.00
293,333.00

4 future cash flow PV PV factor Present Value

principal 3,000,000.00 PV of 1 @.14, n=3 0.674972 2,024,915
PV of OA of 1 @.14,
interest 270,000.00 2.321632 626,841
n=3
2,651,756.00
 3,000,000.00
- 2,651,756.00
348,244.00 discount

7 date interest payment interest expense amortization present value

1/1/2001 3,784,798
12-31-2001 640,000.00 681,264 41,264 3,826,062
12-31-2002 640,000.00 688,691 48,691 3,874,753
12-31-2003 640,000.00 697,455 57,455 3,932,208

12-31-2004 640,000.00 707,797 67,797 4,000,006

8 PV @18%, n=4 PV Factor PV

principal 4,000,000.00 PV of 1 0.515789 2,063,156
interest 640,000.00 PV of OA of 1 2.690062 1,721,640
FV of debt instrument 3,784,796

Issue Price 4,100,000.00 Cash 4,100,000.00

FV - 3,784,796.00 discount 215,204.00
315,204.00 bonds payable 4,000,000.00

share premium- 315,204.00

Conversion feature

date interest payment interest expense amortization present value

1/1/2001 3,784,796
12-31-2001 640,000.00 681,263 41,263 3,826,059
12-31-2002 640,000.00 688,691 48,691 3,874,750
12-31-2003 640,000.00 697,455 57,455 3,932,205
12-31-2004 640,000.00 707,797 67,797 4,000,002

9 issue price 4,100,000.00

FV - 4,200,000.00
equity component 100,000.00

date interest payment interest expense amortization present value

1/1/2001 3,784,796
12-31-2001 640,000.00 681,263 41,263 3,826,059
12-31-2002 640,000.00 688,691 48,691 3,874,750
1/1/2003

retirement price 4,300,000.00 bonds payable

lost on
FV of the bond 4,200,000.00
extinguishment
equity component 100,000.00

Carrying amount 3,874,750.00

Retirement price share premium-
allocated to the 4,200,000.00
convesion feature
bonds
loss on extinguishment 325,250.00
8,000,000.00
518,355.00

-
8,000,000.00
518,355.00
586,667.00
 interest expense 688,691.00
discount 48,691.00
cash 640,000.00

bonds payable 4,000,000.00

loss on
325,247.00
extinguishment
discount 125,247.00
cash 4,200,000.00

bonds payable 4,000,000.00

discount 125,250.00
share capital 3,000,000.00 (10000 x 300)
share premium 874,750.00

share premium-
315,204.00
conversion feature

share premium 315,204.00

4,000,000.00

325,250.00

discount 125,250.00
cash 4,200,000.00

100,000.00

cash 100,000.00