IDS

Problem 8 (Naruto Company)

Amortization Table
Nominal Effective Premium Amortized
Date
Interest Interest Amortization Cost
1/1/2018 108,660.00
12/31/2018 7,000.00 5,433.00 -1,567.00 107,093.00
12/31/2019 7,000.00 5,354.65 -1,645.35 105,447.65
12/31/2020 7,000.00 5,272.38 -1,727.62 103,720.03
12/31/2021 7,000.00 5,186.00 -1,814.00 101,906.03
12/31/2022 7,000.00 5,095.30 -1,906.03 100,000.00

a. Interest Income for 2018 5,433.00

b. Carrying Amount at December 2019 105,447.65
c. Entries to Record in 2020 and 2021
12/31/2020 Cash 7,000.00
Interest Revenue 5,272.38
Debt Investment at Amortized Cost 1,727.62

5/31/2021 Interest Receivable 2,916.67

Interest Revenue 2,160.83
Debt Investment at Amortized Cost 755.83
7,000.00 x 5/12
5,186.00 x 5/12

Cash 108,916.67
Gain on Sale 3,035.80
Interest Receivable 2,916.67
Debt Investment at Amortized Cost 102,964.20
Problem 9 (Donna Corporation)

a.
Amortization Table

Nominal Effective Premium Amortized

Date
Interest Interest Amortization Cost

Jan. 02, Year 1 104,330.00

Dec. 31, Year 1 6,000.00 5,216.50 -783.50 103,546.50
Dec. 31, Year 2 6,000.00 5,177.33 -822.68 102,723.83
Dec. 31, Year 3 6,000.00 5,136.19 -863.81 101,860.02

b. Present Value of the Modified Cash Flow

Present Value of the New Principal
100,000.00 x 90% x 0.9070 81,630.00
Present Value of reduced Interest
90,000.00 x 6% x 1.8594 10,040.76
Total 91,670.76

c.1 Impairment Loss

Carrying Amount, Year 3 101,860.02
Present Value of the Investment 91,670.76
Impairment Loss 10,189.26

c.2 Journal Entries to be recorded

Impairment Loss 10,189.26
Debt Invesmtents at FVCI 10,189.26

d. Interst Income for Years 4 and 5

Year 4 4,583.54
Year 5 4,542.71

Revised Amortization Table

Nominal Effective Premium Amortized
Date
Interest Interest Amortization Cost
Jan. 02, Year 1 91,670.76
Dec. 31, Year 1 5,400.00 4,583.54 -816.46 90,854.30
Dec. 31, Year 2 5,400.00 4,542.71 -857.29 89,997.01
Problem 10 (Classification of Investments in Debt Securities)

1 B and C 6 B and C 11 C
2 A 7 A 12 B and C
3 B and C 8 A 13 A
4 A 9 B and C 14 A
5 B and C 10 B and C 15 B
Problem 11 (Raymond Company)
1 Building Expansion Fund - Cash
Cash

2 Building Expansion Fund Securities

Building Expansion Fund - Cash

3 Building Expansion Fund Securities

Interest Receivable - Building Expansion Fund
Building Expansion Fund - Cash

4 Building Expansion Fund - Cash

Dividend Income

5 Building Expansion Fund Expenses

Building Expansion Fund - Cash

6 Building Expansion Fund - Cash

Interest Receivable - Building Expansion Fund
Interest Income

7 Building Expansion Fund Securities

Building Expansion Fund - Cash

8 Building Expansion Fund - Cash

Building Expansion Fund Securities
Gain on Sale of Building Expansion Fund Securities
Interest Income

9 Building Expansion Fund - Cash

Dividend Income

10 Building Expansion Fund - Cash

Building Expansion Fund Securities
Gain on Sale of Building Expansion Fund Securities

11 Buildings
Building Expansion Fund - Cash

12 Cash
Building Expansion Fund - Cash
Problem 12 (Cordero Corporation)
a. Required Semi-annual Deposits
Future Value 15,000,000.00
FV of Ordinary Annuity 29.78
Semi-annual Deposit 503,725.89

b. Journal Entries, 2019

6/30/2019 503,725.89
503,725.89

12/31/2019 Bond Sinking Fund - Cash 523,874.93

Cash 503,725.89
Interest Income 20,149.04
Problem 13 (Dorina Company)
a. Journal Entries
7/1/2017 Prepaid Life Insurance 120,000.00
Cash 120,000.00

12/31/2017 Life Insurance Expense 60,000.00

Prepaid Life Insurance 60,000.00

6/30/2018 Prepaid Life Insurance 120,000.00

Cash 120,000.00

12/31/2018 Life Insurance Expense 120,000.00

Prepaid Life Insurance 120,000.00

6/30/2019 Prepaid Life Insurance 120,000.00

Cash 120,000.00

12/31/2019 Life Insurance Expense 120,000.00

Prepaid Life Insurance 120,000.00

6/30/2020 Prepaid Life Insurance 120,000.00

Cash 120,000.00

12/31/2020 Life Insurance Expense 120,000.00

Prepaid Life Insurance 120,000.00

Cash Surrender Value 36,000.00

Life Insurance Expense 36,000.00

6/30/2021 Prepaid Life Insurance 120,000.00

Cash 120,000.00

12/31/2021 Life Insurance Expense 120,000.00

Prepaid Life Insurance 120,000.00

Cash Surrender Value 13,000.00

Life Insurance Expense 13,000.00

3/31/2022 Life Insurance Expense 30,000.00

Prepaid Life Insurance 30,000.00

Receivable from Insurance Company 4,000,000.00

Prepaid Life Insurance 30,000.00
Cash Surrender Value 49,000.00
Gain on Insurance Settlement 3,921,000.00
b. Surrender value will not be set up by the company and premiums paid will be recorded as employee benefit expense
yee benefit expense
Problem 14 (Solidbank)

a. Face Value 10,000,000.00

PV Factor 0.32
Receivable,2019 3,220,000.00

b. Carrying Amount, 2019 3,220,000.00

Interest 0.12
Interest Income 386,400.00

c. 1/1/2019 Advances to Officers 3,220,000.00

Prepaid Compensation Expense 6,780,000.00
Cash 10,000,000.00

12/31/2019 Advances to Officers 386,400.00

Interest Revenue 386,400.00

Compensation Expense 678,000.00

Prepaid Compensation Expense 678,000.00

12/31/2020 Advances to Officers 432,768.00

Interest Revenue 432,768.00

Compensation Expense 678,000.00

Compensation Expense 678,000.00

d. Amortized Cost
Original Value 3,220,000.00
Interest Revenue 2019 386,400.00
2020 432,768.00
Amortized Cost, 2020 4,039,168.00