Q2 Chapters 5 6 Prof

Chapters 5-6 2020
PROBLEMS
Use the following for the next two questions:

On January 1, 2020 Chespin Co. issued 3-year bonds with a face value of P1,200,000 and stated interest of 8%
per year payable annually on December 31. The bonds were acquired to yield 10%. The bonds were
appropriately classified as financial liability at amortized cost. (PVF 4 Decimal)
1) How much is the issue price of the bonds on January 1, 2020?

2) How much is the interest expense for 2020?
Initial:
FV/IP/PV of B/P 1,140,302

Bond issue cost -
Initial CA 1,140,302
Accrued interest -
Net cash proceeds 1,140,302
PV of Future Cashflows: Future CF PVF PV

Principal 1,200,000 0.7513 901,560
Interest 96,000 2.4869 238,742
PV, 1/1/20 1,140,302
ER 10%
Interest expense, 2020 114,030
3) The following information pertains to Braves Company issuance of bonds on July 1, 2016. Face amount –
P10,000,000; Term – 10 years; Stated interest rate – 8%; interest payment dates – July 1 and January 1;
m
Effective yield – 12%.
er as At 4% At 6%
co
Present value of an ordinary annuity of P1 for 10 periods 8.11 7.36
eH w
Present value of P1 for 10 periods 0.68 0.56
Present value of P1 for 20 periods o. 0.46 0.31
rs e
ou urc
At 8% At 12%
o

aC s
What should be the total issue price of the bonds?

vi y re
Initial:
Bond issue cost -
ed d
Accrued interest -
ar stu

Principal 10,000,000 0.31 3,100,000
is
Interest 400,000 11.47 4,588,000

PV 7,688,000
Th
4) On July 1, 2020, Marlins Corporation issued at 97 plus accrued interest, P2,000 of its 10%, P1,000 bonds. The
bonds are dated January 1, 2020 and mature on April 1, 2028. Interest is payable semi-annually on April 1 and
October 1. From the bond issuance, Marlins would receive net cash of
sh
Initial:
Bond issue cost -
Accrued interest:
Principal 2,000,000
Nominal rate 5%
April 1 - July 1 3/6 50,000
5) On May 1, 2020 Red Company issued 2,000,000, 10 year, 9% bonds at 105 including accrued interest. These
bonds are dated January 1, 2020. Interest is payable semi-annually on January 1 and July 1. Transaction costs
of 10,000 were paid by Red. What is the net cash receipts from the bond issuance?
Initial:
FV/IP/PV of B/P, including accrued interest 2,100,000
Bond issue cost 10,000
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FEU – IABF Page 1
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Chapters 5-6 2020
6) On March 1, 2022, Erik Company issued 10,000 of its P1,000 face value bonds at 95 plus accrued interest. Erik
Company paid bond issue cost of P1,000,000. The bonds were dated November 1, 2021, mature on November
1, 2031, and bear interest at 12% payable semiannually on November 1 and May 1. The net amount that Erik
receive from the bond issuance is
Initial:
Bond issue cost 1,000,000
Accrued interest:
Principal 10,000,000
Nominal rate 6%
Nov. 1, 2021 - Mar. 1, 2022 4/6 400,000

On January 1, 2020, Pharaoh Company issued 3-year bonds with a face value of P1,200,000 and stated interest
of 8% per year. The bonds mature in 3 equal annual installments every December 31. The interest is also
payable every December 31. The bonds acquired to yield 10%. The bonds were appropriately classified as
financial liability at amortized cost.
7) How much is the issue price of bonds on January 1, 2020?

Initial:
Bond issue cost -
m
Accrued interest
er as -
co
eH w
PV of Future Cashflows:
Principal o. Interest PVF PV
rs e
400,000 96,000 0.9091 450,909

ou urc
400,000 64,000 0.8264 383,471

400,000 32,000 0.7513 324,568
PV, 1/1/20 1,158,948
ER 10%
o
Interest expense, 2020 115,895

aC s

vi y re
Haphazard Company is contemplating to on issuing a 12%, 3-year, P4,000,000 bonds. Principal is due at
maturity but interest is due annually at each year-end. Haphazard determines that the current market rate on
January 1, 2020 is 10%.
ed d
Present value of 1 for 3 periods at 10% 0.7513148

Present value of annuity of 1 for 3 periods at 10% 2.4868519
ar stu
9) How much is the estimated issue price of the bonds assuming Haphazard issues bonds on January 1, 2020?
10) If Haphazard plans to issue the bonds on April 1, 2020. How much is the estimated total proceeds from the
issuance of the bonds on April 1, 2020?
is
Initial:
Th

Bond issue cost -
Accrued interest -
sh
Net cash proceeds

4,198,948

Principal 4,000,000 0.75 3,005,259
Interest 480,000 2.49 1,193,689
PV, 1/1/20 4,198,948
Less: Premium amortization
Nominal interest (Jan. 1 - Apr. 1) 120,000
Effective interest (Jan. 1 - Apr. 1) 104,974 15,026
CA, 4/1/20 4,183,922
Add: Accrued interest (Jan. 1 - Apr. 1) 120,000
IP of B/P, Apr. 1, 2020, inc. accrued interest 4,303,922
FEU – IABF Page 2
Chapters 5-6 2020
11) On March 1, 2020, Madine Corporation issued at 103 plus accrued interest, 1,000 of its 15%, P1,000 bonds.
The bonds are dated January 1, 2020 and mature on January 1, 2029. Interest is payable semi-annually on
January 1 and July 1. Madine paid transaction costs of P60,000. Based on the given information, how much
would Madine realize as net cash receipts from the bond issuance?
Initial:
Initial CA 970,000
Accrued interest:
Principal 1,000,000
Nominal rate 7.5%
Jan. 1 - Mar. 1 2/6 25,000
Net cash proceeds 995,000

On January 1, 2020, LACEA COMPANY issued 7% term bonds with a face amount of P1,000,000 due January 1,
2028. Interest is payable semiannually on January 1 and July 1. On the date of issue, investors were willing
to accept an effective interest of 6%. (PVF complete decimal)
12) The bonds were issued on January 1, 2020 at

A. A premium B. An amortized value C. Book value D. A discount
13) Using the effective interest amortization method, LACEA COMPANY recorded interest expense for the 6 months
ended June 30, 2020, in the amount of
14) LACEA COMPANY recorded interest expense for the 6 months ended December 31, 2020, in the amount of
15) The carrying value of the bonds on July 1, 2021 is:
m
16) A bond issue sold at a premium is valued on the statement of financial position at the
A. Maturity value
er as
C. Maturity value plus the unamortized portion of the premium
co
B. Cost at the date of investment D. Maturity value less the unamortized portion of the premium
eH w
Initial:
FV/IP/PV of B/P o.
1,062,806
rs e
Bond issue cost -

ou urc
Accrued interest -
o

Principal 1,000,000 0.6232 623,167
aC s
Interest 35,000 12.5611 439,639

vi y re
PV, 1/1/20 1,062,806

Issued at a premium
Amortization:
ed d
Date NI EI Prem. Amort. CA

1/1/2020 1,062,806
ar stu
7/1/2020 35,000 31,884 3,116 1,059,690

1/1/2021 35,000 31,791 3,209 1,056,480
7/1/2021 35,000 31,694 3,306 1,053,175
is
Presentation:
Bonds payable 1,000,000
Th
Premium on B/P 53,175

CA of B/P 1,053,175
The bonds are presented at
Maturity Value/Face Value plus unamortized premium.
sh
17) On December 31, 2019, Dome Company issued P4,000,000, 8% serial bonds, to be repaid in the amount of
P800,000 each year. Interest is payable annually on December 31. The bonds were issued to yield 10% a year.
The bond proceeds totaled P3,805,600 based on the present value on December 31, 2019 of five annual
payments.
Due date Principal Interest Present value on 12/31/19

12/31/2020 800,000 320,000 1,018,000
12/31/2021 800,000 256,000 872,200
12/31/2022 800,000 192,000 745,000
12/31/2023 800,000 128,000 633,800
12/31/2024 800,000 64,000 536,600
What is the carrying amount of the bonds payable on December 31, 2020 using the interest method of amortizing
the bond discount?
FEU – IABF Page 3
Chapters 5-6 2020
Amortization:
Date NI EI Disc. Amort. Principal payment CA
12/31/2019 3,805,600
12/31/2020 320,000 380,560 60,560 800,000 3,066,160
18) On January 1, 2020, Bontoc Company issued 5,000,000, 8% serial bonds to be repaid in the amount of
P1,000,000 each year. Interest is payable annually on December 31. The bonds were issued to yield 10% a
year. The bond proceeds were P4,757,000 based on the present value at January 1, 2020 of five annual
payments. The entity amortized the bond discount by the interest method. On December 31, 2020, what is the
carrying amount of the bonds payable?
Amortization:
12/31/2019 4,757,000
12/31/2020 400,000 475,700 75,700 1,000,000 3,832,700

Cubs, Inc. issued P1,000,000, 12%, 20-year bonds at 102 plus accrued interest on February 1, 2020. The bonds
are dated January 1, 2020 and pay interest semi-annually every June 30 and December 31. Transaction costs
totaled P50,000.
19) How much accrued interest on the bonds shall Cubs collect from the investor on February 1?
20) What is the initial carrying amount of the bonds on February 1, 2020?
Initial:
m
Initial CA, Feb. 1, 2020 970,000
Accrued interest:
er as
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Principal 1,000,000
eH w
Nominal rate 6%
Jan. 1 - Feb. 1 1/6 10,000
Net cash proceeds o. 980,000
rs e
ou urc
21) A company issues P20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2022. Interest is paid on June
30 and December 31. The proceeds from the bonds are P19,604,145. Using effective-interest amortization, how
much interest expense will be recognized in 2022?
o
Amortization:
Date NI EI Disc. Amort. CA
aC s
1/1/2022 19,604,145
vi y re
6/30/2022 780,000 784,166 4,166 19,608,311

12/31/2022 780,000 784,332 4,332 19,612,643
1,568,498
ed d

Brooke Company issued P6,000,000, 11%, 10-year bonds on May 31, 2020 when the market interest was 10%.
ar stu
The bonds are priced at 106.25. The bonds pay interest on May 31 and November 30.
22) What is the carrying amount of the bond on December 31, 2020 statement of financial position?
23) What is the total interest expense that Brooke Company will record the year 2020?
is
Initial:
Th

Bond issue cost -
Accrued interest -
sh
Amortization:
5/31/2020 6,375,000
11/30/2020 330,000 318,750 11,250 6,363,750
5/31/2021 330,000 318,188 11,813 6,351,938
CA, 11/30/2020 6,363,750

Less: Prem. Amort. 11,813
Nov. 30 - Dec. 31 1/6 1,969
CA, 12/31/2020 6,361,781
Interest expense:
May 31, 2020 - Nov. 31, 2020 318,750
Dec. 1, 2020 - Dec. 31, 2020 53,031
371,781
FEU – IABF Page 4
Chapters 5-6 2020
24) On March 1, 2020, Bayleef Co. issued P700,000 of 10% bonds to yield 8%. Interest is payable semiannually on
February 28 and August 31. The bonds mature in 10 years. Bayleef Co. is a calendar year corporation. Compute
the interest expense to be reported in 2020.
Initial:
FV/IP/PV of B/P 795,132
Bond issue cost -
Initial CA 795,132
Accrued interest -
Net cash proceeds 795,132

Principal 700,000 0.4564 319,471
Interest 35,000 13.5903 475,661
PV, 3/1/20 795,132
Amortization:
3/1/2020 795,132
8/1/2020 35,000 31,805 3,195 791,938
2/28/2021 35,000 31,678 3,322 788,615
Interest expense:
Mar. 1, 2020 - Aug. 1, 2020 31,805
Aug. 1, 2020 - Dec. 31, 2020 21,118
52,924
m
er as
25) On January 1, 2021, Minun Co. issued 1,000, P4,000, 10%, 3 years bonds for P3,807,852. Principal is due on
December 31, 2023 but interest are due annually every year-end. The effective interest rate is 12%. How much
co
is the unamortized discount on bonds as of December 31, 2021?
eH w
Amortization:
Date NI o. EI Disc. Amort. CA Unamort. Disc.
rs e
1/1/2021 3,807,852 192,148

ou urc
12/31/2021 400,000 456,942 56,942 3,864,794 135,206
26) On January 1, 2020 Cynda Co. issued P200,000 of 8% serial bonds, to be repaid in the amount of P40,000 each
year. Interest is payable annually on December 31. The bonds were issued to yield 10% a year. In its December
o
31, 2020 statement of financial position, at what amount should Cynda report the carrying amount of the bonds?
aC s
(PVF 5 Decimal)
vi y re
Date Principal Interest PVF PV
12/31/2020 40,000 16,000 0.90909 50,909
12/31/2021 40,000 12,800 0.82645 43,637
ed d
12/31/2022 40,000 9,600 0.75131 37,265

12/31/2023 40,000 6,400 0.68301 31,692
ar stu
12/31/2024 40,000 3,200 0.62092 26,824

PV, 1/1/20 190,326
Amortization:
is

1/1/2020 190,326
Th
12/31/2020 16,000 19,033 3,033 40,000 153,359
27) On January 1, 2020, Slak Co. issued 10%, P12,000,000 bonds at 105. Transaction costs incurred amounted to
P177,096. Principal on the bonds mature in three equal annual installments. Interest payments are also made
sh
annually at each year-end. How much is the carrying amount of the bonds on December 31, 2020?
Initial:
FV/IP/PV of B/P 12,600,000
Accrued interest -
Amortization: Use 8%*

Date NI EI Prem. Amort. Principal payment CA
1/1/2020 12,422,904
12/31/2020 1,200,000 993,832 206,168 4,000,000 8,216,736
*ER is not given; Find the ER that will give you a PRESENT VALUE = INITIAL CA
The method will be TRIAL and ERROR. Since the bonds were issued at a PREMIUM, the ER is
assumed to be lower than the NR.
FEU – IABF Page 5
Chapters 5-6 2020
TRIAL and ERROR
ER using 9%
Date Principal Interest PVF PV Initial CA
12/31/2020 4,000,000 1,200,000 0.91743 4,770,642
12/31/2021 4,000,000 800,000 0.84168 4,040,064
12/31/2022 4,000,000 400,000 0.77218 3,397,607
PV, 1/1/20 12,208,313 12,422,904 X - Not equal
ER using 8%
Date Principal Interest PVF PV Initial CA
12/31/2020 4,000,000 1,200,000 0.92593 4,814,815
12/31/2021 4,000,000 800,000 0.85734 4,115,226
12/31/2022 4,000,000 400,000 0.79383 3,492,862
PV, 1/1/20 12,422,903 12,422,904 ✓ - equal
28) Prescott Corporation issued ten thousand P1,000 bonds on January 1, 2018. They have a ten-year term and
pay interest semiannually. This is the partial bond amortization schedule for the bonds.
Payment Cash Effective interest Decrease in balance Outstanding balance

11,487,747
1 400,000 344,632 55,368 11,432,379
2 400,000 342,971 57,029 11,375,350
3 400,000 341,261 58,739 11,316,611
4 400,000 - - -
m
er as
What is the effective annual rate of interest on the bonds?
co
eH w
Effective interest 344,632
Carrying amount 11,487,747
Semi-annual effective rate o. 3.00%
rs e
Annual effective rate 6.00%

ou urc

On May 1, 2020, Barcelona Company issued a five-year P2,000,000 face value bonds with stated rate of 16%.
The bonds were issued to yield 14%. Interests are payable semi-annually on May 1 and November 1. Barcelona
o
Company uses the calendar year and the effective interest method of amortization. Present value of 1 at 7%
aC s
for 10 periods is 0.5084. Present value of an ordinary annuity of 1 at 7% for 10 periods is 7.0236.
vi y re
29) How much is the issue price of the bonds?

30) What is the bond interest expense for the year 2020?
31) What is the bond carrying amount at December 31, 2021?
32) How much is the unamortized premium on bonds payable on December 31, 2021?
ed d
33) How much is the interest payable on December 31, 2020?

ar stu
Initial:
Bond issue cost -
is
Accrued interest -
Th

Principal 2,000,000 0.5084 1,016,800
Interest 160,000 7.0236 1,123,776
sh
PV, 5/1/20 2,140,576
Amortization:
5/1/2020 2,140,576
11/1/2020 160,000 149,840 10,160 2,130,416
5/1/2021 160,000 149,129 10,871 2,119,545
11/1/2021 160,000 148,368 11,632 2,107,914
5/1/2022 160,000 147,554 12,446 2,095,468
Interest expense for 2020:

May 1, 2020 - Nov. 1, 2020 149,840
Nov. 1, 2020 - Dec. 31, 2020 49,710
199,550
FEU – IABF Page 6
Chapters 5-6 2020
Subsequent measurement:
CA, 11/1/2021 2,107,914
Less: Prem. Amort. 12,446
Nov. 1 - Dec. 1, 2021 2/6 4,149
CA, 12/31/2021 2,103,765
Face value 2,000,000
Unamort. Premium, 12/31/2021 103,765
Interest payable (Nov. 1, 2021 - Dec. 31, 2021) 160,000 2/6 53,333.33
34) On December 31, 2020, the liability section of Phillies Company’s statement of financial position included bonds
payable of P10 million and unamortized premium on bonds payable of P180,000. Further verification revealed
that these bonds were issued on December 31, 2018 and will become due on December 31, 2028. Interest at
12% is payable every June 30 and December 31. On April 1, 2021, Phillies retired P4,000,000 of these bonds
at 97 plus accrued interest. How much was the total amount of cash paid for the retirement of bonds on April
1, 2021?
Retirement price 3,880,000

Accrued interest:
Principal 4,000,000
Nominal rate 12%
Jan. 1 - Mar. 31 3/12 120,000
Cash paid for retirement of bonds 4,000,000
35) In the statement of financial position of Nationals, Inc. as of December 31, 2020, the following accounts appear:
18% Bonds Payable, Due January 1, 2022 1,000,000
m
Premium on bonds payable 70,000
Accrued interest on bonds payable
er as 90,000
co
eH w
Interest is payable semi-annually on January 1 and July 1. On January 1, 2021, Nationals, Inc. redeemed the
bonds at 96 plus accrued interest. How much is the gain or (loss) on the redemption of the bonds?
o.
rs e
Retirement:
ou urc
Retirement price 960,000

Less: CA
Face value 1,000,000
Unamortized premium 70,000 1,070,000
o
Gain on redemption 110,000

aC s
36) Pomeranian Company issued 10-year bonds on January 1, 2014. The amortization and interest schedule below
vi y re
reflects the bond issuance and the subsequent interest payments and charges:
Date Interest Paid Interest Expense Amount Unamortized Carrying Value

01.01.14 -- -- 28,253 471,747
ed d
12.31.14 55,000 56,610 26,643 473,357

12.31.15 55,000 56,803 24,840 475,160
ar stu
12.31.16 55,000 57,019 22,821 477,179

12.31.17 55,000 57,261 20,560 479,440
12.31.18 55,000 57,533 18,027 481,973
12.31.19 55,000 57,837 15,190 484,810
is
12.31.20 55,000 57,177 12,013 487,987

12.31.21 55,000 58,558 8,455 491,545
Th
12.31.22 55,000 58,985 4,470 495,530

12.31.23 55,000 59,470 -- 500,000
If all the bonds were retired at 103 plus accrued interest on March 31, 2020, how much would be the gain/loss
sh
on retirement of bonds?
Retirement:
CA, 12/31/2019 484,810
Add: Amort. Disc. 3,177
Jan. 1 - Mar. 31, 2020 3/12 794
CA, 03/31/2020 485,604
Retirement price 515,000
Loss on retirement 29,396
37) On December 31, 2017, Affenpinscher Corporation issued 20-year, noncovertible bonds of P5,000,000 for
P5,851,160 to yield 10%. Interest is payable annually on December 31 at 12%. On June 1, 2020, Affenpinscher
retires 3,000 of its own P1,000 bonds. Total cash paid by Affenpinscher is P3,120,000. The accounting period
of Affenpinscher is the calendar year. What is the amount of gain or loss on early retirement of bond that will
be reported in 2020 income statement?
FEU – IABF Page 7
Chapters 5-6 2020
Retirement:
Total cash paid 3,120,000
Less: Accrued interest 600,000
Jan. 1 - Jun. 1, 2020 5/12
(3k/5k bonds) 3/5 150,000
Retirement price for bonds 2,970,000
Less: CA of B/P, Jun. 1, 2020
CA of B/P, Dec. 31, 2019 5,819,904
Less: Prem. Amort. (5 / 12 mos.) 7,504
CA of B/P, Jun. 1, 2020 (3k/5k bonds) 3k/5k 3,487,440
Gain on retirement 517,440
Amortization:
12/31/2017 5,851,160
12/31/2018 600,000 585,116 14,884 5,836,276
12/31/2019 600,000 583,628 16,372 5,819,904
12/31/2020 600,000 581,990 18,010 5,801,894
Use the following for the next five questions:

On January 1, 2020, Spewpa Co. issued 4-year bond with a face value of P2,000,000 and stated interest 8%
payable annually every December 31. The company received P1,898,205 and incurred P25,000 of transaction
cost. The bonds were retired on January 1, 2023 at 105 and incurred a transaction cost of P20,000.
38) How much is the initial carrying amount of the bonds on January 1, 2020?
39) What is the effective interest rate for the bond?
m
41) How much is the carrying amount of the liability on December 31, 2021?
er as
42) How much is the gain (loss) on derecognition?
co
eH w
Initial:
Bond issue cost o.25,000
rs e
ou urc
Accrued interest -
PV of Future Cashflows: Future CF PVF PV Initial CA

o
Principal 2,000,000 0.6830 1,366,027

aC s
Interest 160,000 3.1699 507,178

PV, 1/1/20 1,873,205 1,873,205 ✓ - equal
vi y re
*10% Effective interest rate.

PVF of 1 @ 10% for 4 periods - Found using trial and error.
The PVF used must give a present value that is equal to the initial carrying amount of the bonds.
ed d
Amortization:
ar stu

1/1/2020 1,873,205
12/31/2020 160,000 187,321 27,321 1,900,526
12/31/2021 160,000 190,053 30,053 1,930,578
is
12/31/2022 160,000 193,058 33,058 1,963,636

Th
Retirement:
Bond retirement cost 20,000
Total 2,120,000
sh
Less: CA of B/P, Jan. 1, 2023 1,963,636

Loss on retirement 156,364
Use the following for the next three questions:

On January 1, 2019, Kanye West Corporation issued 2,000 of its 5-year P1,000 face value, 11% bonds dated
January 1 at an effective annual interest rate of 9%. Interest is payable each December 31. Kanye West uses
the effective interest method of amortization. On December 31, 2020, the 2,000 bonds were extinguished early
through acquisition in the open market by Kanye West for P1,980,000 plus accrued interest.
43) The issue price of the 2,000, 5-year, P1,000 face value bonds on January 1, 2019 is
44) The carrying amount of the bonds payable as of December 31, 2019 is
45) The gain on early retirement of bonds on December 31, 2020 is
FEU – IABF Page 8
Chapters 5-6 2020
Initial:
Bond issue cost
Accrued interest -

Principal 2,000,000 0.6499 1,299,863
Interest 220,000 3.8897 855,723
PV, 1/1/19 2,155,586
Amortization:
1/1/2019 2,155,586
12/31/2019 220,000 194,003 25,997 2,129,589
12/31/2020 220,000 191,663 28,337 2,101,252
Retirement:
Less: CA of B/P, Dec. 31, 2020 2,101,252
Gain on retirement 121,252
END
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aC s
vi y re
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FEU – IABF Page 9
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Chapters 5-6 2020

Use the following for the next two questions:

1) How much is the issue price of the bonds on January 1, 2020?

FV/IP/PV of B/P 1,140,302

PV of Future Cashflows: Future CF PVF PV

Present value of P1 for 20 periods 0.21 0.31

What should be the total issue price of the bonds?

Net cash proceeds 7,688,000

PV of Future Cashflows: Future CF PVF PV

Interest 400,000 11.47 4,588,000

Use the following for the next two questions:

7) How much is the issue price of bonds on January 1, 2020?

400,000 96,000 0.9091 450,909

400,000 64,000 0.8264 383,471

Interest expense, 2020 115,895

Use the following for the next two questions:

Present value of 1 for 3 periods at 10% 0.7513148

FV/IP/PV of B/P 4,198,948

Net cash proceeds

PV of Future Cashflows: Future CF PVF PV

Use the following for the next two questions:

12) The bonds were issued on January 1, 2020 at

Bond issue cost -

PV of Future Cashflows: Future CF PVF PV

Interest 35,000 12.5611 439,639

PV, 1/1/20 1,062,806

Date NI EI Prem. Amort. CA

7/1/2020 35,000 31,884 3,116 1,059,690

Premium on B/P 53,175

Due date Principal Interest Present value on 12/31/19

Use the following for the next two questions:

6/30/2022 780,000 784,166 4,166 19,608,311

Use the following for the next two questions:

FV/IP/PV of B/P 6,375,000

Net cash proceeds 6,375,000

CA, 11/30/2020 6,363,750

PV of Future Cashflows: Future CF PVF PV

1/1/2021 3,807,852 192,148

12/31/2021 400,000 456,942 56,942 3,864,794 135,206

12/31/2022 40,000 9,600 0.75131 37,265

12/31/2024 40,000 3,200 0.62092 26,824

Date NI EI Disc. Amort. Principal payment CA

12/31/2020 16,000 19,033 3,033 40,000 153,359

Amortization: Use 8%*

TRIAL and ERROR

Payment Cash Effective interest Decrease in balance Outstanding balance

Annual effective rate 6.00%

Use the following for the next two questions:

29) How much is the issue price of the bonds?

33) How much is the interest payable on December 31, 2020?

PV of Future Cashflows: Future CF PVF PV

PV, 5/1/20 2,140,576

Interest expense for 2020:

Retirement price 3,880,000

18% Bonds Payable, Due January 1, 2022 1,000,000

Retirement price 960,000

Gain on redemption 110,000

Date Interest Paid Interest Expense Amount Unamortized Carrying Value

12.31.14 55,000 56,610 26,643 473,357

12.31.16 55,000 57,019 22,821 477,179

12.31.20 55,000 57,177 12,013 487,987

12.31.22 55,000 58,985 4,470 495,530

Use the following for the next five questions: