Syifa Aurahmah Apriani

183112340340058

EXERCISE 14-6

Schedule of Discount Amortization Effective-Interest Method (12%)

Carrying Amount
Cash Paid Interest Expense Discount of Bonds
Year Amortized
(1) (2) (3) (4)
Jan. 1, 2010 — — — £2,783,724.00
Dec. 31, 2010 £300,000 £334,046.88* £34,046.88 2,817,770.88
Dec. 31, 2011 300,000 338,132.51 38,132.51 2,855,903.39
Dec. 31, 2012 300,000 342,708.41 42,708.41 2,898,611.80
Dec. 31, 2013 300,000 347,833.42 47,833.42 2,946,445.22
Dec. 31, 2014 300,000 353,554.78** 53,554.78 3,000,000.00

*£334,046.88 = £2,783,724 X .12.

**Rounded.

EXERCISE 15-1

a) Jan. 10 Cash (80,000 X €6) 480,000

Share Capital—Ordinary (80,000 X €3) 240,000
Share Premium Ordinary 240,000

Mar. 1 Organization Expense 35,000

Share Capital—Ordinary (5,000 X €3) 15,000
Share Premium—Ordinary 20,000

July 1 Cash (30,000 X €8) 240,000

Share Capital—Ordinary (30,000 X €3) 90,000
Share Premium—Ordinary (30,000 X €5) 150,000

Sept 1 Cash (60,000 X €10) 600,000

Share Capital—Ordinary (60,000 X €3) 180,000
Share Premium—Ordinary (60,000 X €7) 420,000
(b) If the shares have a stated value of €2 per share, the entries in (a) would be the
same except for the euro amounts. For example, the Jan. 10 entry would
include credits of €160,000 to Share Capital—Ordinary and €320,000 to
Share Premium—Ordinary.

EXERCISE 15-3

(a) Land ($60 X 25,000) 1,500,000

Treasury Shares ($48 X 25,000) 1,200,000
Share Premium—Treasury 300,000

(b) One might use the cost of treasury shares. However, this is not a relevant
measure of this economic event. Rather, it is a measure of a prior, unrelated
event. The appraised value of the land is a reasonable alternative (if based on
appropriate fair value estimation techniques). However, it is an appraisal as
opposed to a market-determined price. The trading price of the shares is
probably the best measure of fair value in this transaction.