Answers - Chapter 2 Vol 2 2009

CHAPTER 2
NON-CURRENT LIABILITIES
PROBLEMS
2-1.
(Ruby Corporation)
At 8%
Bond issue price
Nominal interest for 2009
Interest expense for 2009
Premium/discount amortization in 2009
Bond carrying value at December 31, 2009
Nominal interest for 2010
Interest expense for 2010
Premium/discount amortization in 2010
Bond carrying value at December 31, 2010
1,081,145
50,000
43,246
6,754
1,074,391
100,000
85,671
14,059
1,060,332
At 11%
962,280
50,000
52,925
2,925
965,205
100,000
106,342
6,342
971,547
Computations:
At 8%
Issue price = (1,000,000 x 0.6756) + (50,000 x 8.1109)
= 675,600 + 405,545 = 1,081,145
Date
06/30/09
12/31/09
06/30/10
12/31/10
A
B
=
=
A
Interest
Paid
B
Interest
Expense
C
Premium
Amortization
50,000
50,000
50,000
43,246
42,976
42,695
6,754
7,024
7,035
D
Bond
Carrying Value
1,081,145
1,074,391
1,067,367
1,060,332
Face value x 5%
Carrying value, beg of year x 4%
At 11%
Issue price = (1,000,000 x 0.5854) + (50,000 x 7.5376)
= 585,430 + 376,880 = 962,280
Date
06/30/09
12/31/09
06/30/10
12/31/10
2-2.
A
Interest
Paid
B
Interest
Expense
C
Discount
Amortization
D
Bond
Carrying Value
50,000
50,000
50,000
52,925
53,086
53,256
2,925
3,086
3,256
962,280
965,205
968,291
971,547
(Fire Company)
(a)
Issue price
Present value of face value
(4,000,000 x 0.5084)
Present value of interest payments (320,000 x 7.0236)
Issue price
(b)
Amortization Table
P2,033, 600
2,247,552
P4,281,152
Chapter 2 - Non-Current Liabilities
Date
3/01/09
8/31/09
2/28/10
8/31/10
2/28/11
(c)
03/01/09
08/31/09
12/31/09
12/28/10
2-3.
(b)
(Onyx)
(a)
Interest
Expense
299,681
298,258
296,736
295,108
Premium
Amortization
20,319
21,742
23,264
24,892
Cash
Bonds Payable
Premium on Bonds Payable
Bond Carrying
Value
4,281,152
4,260,833
4,239,091
4,215,827
4,190,935
4,281,152
4,000,000
281,152
Interest Expense
Cash
299,681
20,319
Interest Expense (298,258 x 4/6)

Interest Payable (320,000 x 4/6)
198,839
14,494
Interest Expense
Interest Payable
Cash
99,419
7,248
213,333
(Metal Corporation)
Market value of bonds
Market value of warrants
Total issue price
(a)
2-4.
Interest
Paid
320,000
320,000
320,000
320,000
320,000
213,333
320,000
5,000,000 x .98
4,900,000
5,000 x 70
350,000
5,250,000
Cash
Discount on Bonds Payable
Bonds Payable
Share Warrants Outstanding
5,250,000
100,000
Cash (5,000 x 20 x 20)

Ordinary Shares (5,000 x 20 x 15)
Share Premium
2,000,000
350,000
5,000,000
350,000
1,500,000
850,000
Issue price of bonds with warrants (1,000,000 x 1.03)
Bond price without warrants

1,000,000 x 0.3220
100,000 x 5.6502
Value of share warrants
(b)
Interest Expense for 2009 (887,020 x 12% x 10/12
(c)
Bond carrying value, March 1, 2009

Amortization through December 31, 2009
887,020 x 12% x 10/12
1,000,000 x 12% x 10/12
10
1,030,000
322,000
565,020
887,020
142,980
88,702
887,020
88,702
83,333
5,369
Bond carrying value, December 31, 2009

(d)
2-5.
892,389
Cash (1,000 x 30 x 50)

Ordinary Share (30,000 x 25)
Share Premium
1,500,000
142,980
750,000
892,980
(Celeron Company)
(a)
Issue price of convertible bonds
Issue price of bonds without conversion privilege
2,000,000 x 0.5674
200,000 x 3.6048
Allocation to equity
(b)
2,000,000
1,134,800
720,960
1,855,760
144,240
Amortization Table
Interest
Interest
Date
Paid
Expense
07/01/09
06/30/10
200,000
222,691
06/30/11
200,000
225,414
06/30/11
06/30/11
06/30/12
80,000
91,386
06/30/13
80,000
92,572
06/30/14
80,000
94,316*
*Adjusted; difference is due to rounding off.
(c)
07/01/09
Premium
Amortization
22,691
25,414
11,386
12,752
14,316
Cash
Bonds Payable
2,000,000
144,240
2,000,000
144,240
PIC Arising from Bond Conversion Privilege
06/30/10
06/30/11
06/30/11
Interest Expense
Cash
222,691
Interest Expense
Cash
225,414
Bonds Payable
PIC Arising from Conversion Privilege
Ordinary Share
Share Premium
22,691
200,000
25,414
200,000
1,200,000
86,544
Carrying value,bonds converted (1,903,865 x 120/200
Face value of bonds converted

Discount on bonds payable cancelled
Value of equity converted (144,240 x 120/200)
Par value of ordinary shares issued (120 x 80 x 100)
11
Bond Carrying
Value
1,855,760
1,878,451
1,903,865
(1,142,319)
761,546
772,932
785,684
800,000
57,681
960,000
268,863
1,142,319
1,200,000
57,681
86,544
960,000
06/30/12
06/30/13
06/30/14
06/30/14
Interest Expense
Cash
91,386
Interest Expense
Cash
92,752
Interest Expense
Cash
94,316
Bonds Payable
11,386
80,000
12,752
80,000
14,316
80,000
800,000
57,696
Cash
800,000
57,696
PIC from Unexercised Bond Conversion Privilege
(144,240 86,544)
2-6.
(Iron Company)
Bonds Payable
Premium on Bonds Payable (450,000 x 2/20)
PIC Arising from Bond Conversion Privilege(320,000 x 2/20)
2,000,000
45,000
32,000
Ordinary Shares (1,000 x 60 x 20)

Share Premium
2-7.
1,200,000
877,000
(Lim Corporation)
(a)
Cash
Bonds Payable
5,500,000
5,000,000
200,000
300,000
(b)
Bonds Payable
1,000,000
10,000
60,000
Ordinary Share (200 x 40 x 100)

Share Premium
300,000 x 1/5 = 60,000
(c)
Bonds Payable
800,000
270,000
2,000,000
20,000
120,000
Cash (2,000,000 x 1.04)

Gain on Retirement of Bonds
2,080,000
10,000
50,000
PIC from Unexercised Bond Conversion Privilege
Retirement price
2,080,000
Retirement price on account of liability
2,000,000 x 1.005
Retirement price on account of equity
Carrying value of bonds retired

Face value
Unamortized premium (50,000 x 2/5)
12
2,010,000
70,000
2,000,000
___20,000
2,020,000
Retirement price of bonds (2M x 1.005)
Gain on retirement of bonds
2,010,000
10,000
Carrying value of equity cancelled

Retirement price on account of equity
Gain on cancellation taken to equity

2-8.
120,000
70,000
50,000
(Emerald Corporation)
The following table may facilitate the computations required in this problem.
Date
12/01/09
06/01/10
12/01/10
06/01/11
12/01/11
06/01/12
12/01/12
06/01/13
12/01/13
06/01/14
12/01/14
Interest
Paid
300,000
300,000
300,000
300,000
300,000
180,000
180,000
180,000
180,000
180,000
Interest
Expense
269,304
267,769
266,157
264,465
262,688
156,494
155,318
154,084
152,788
151,443*
Premium
Amortization
30,696
32,231
33,843
35,535
37,312
23,506
24,682
25,916
27,212
28,557
Bond
Carrying Value
5,386,072
5,355,376
5,323,145
5,289,302
5,253,767
5,216,455
3,106,367
3,081,685
3,055,769
3,028,557
3,000,000

(a)
Carrying value, December 1, 2006 (see, table)
5,323,145
____5,640
5,317,505
Amortization for one month (33,843 x 1/6)

Carrying value, December 31, 2010
(b)
(c)
Interest Expense for year 2010

January 1-June 1, 2010 (269,304 x 5/6)
June 1-December 1, 2010
December 1-31, 2010 (266,157 x 1/6)
Total
224,420
267,769
_44,360
536,549
Carrying value of bonds retired on December 1, 2011
5,253,767 x 2/5
Carrying value of bonds retired on April 1, 2012
2,101,507
____9,950
2,091,557
(d)
Carrying value of bonds retired

Redemption price (2,000,000 x 1.04)
Gain on redemption of bonds
2,091,557
2,080,000
11,557
(e)
Carrying value of remaining bonds, December 1, 2011

Amortization through December 31, 2011 (24,682 x 1/6)
Carrying value of remaining bonds, December 31, 2011
3,106,367
4,114
3,102,253
(f)
On bonds redeemed:
Amortization through April 1, 2012 (37,312 x 4/6 x 2/5)
January 1-April 1, 2012 (262,688 x 2/5 x 3/6)
2012
52,538
203
On remaining bonds
January 1-June 1, 2012 (262,688 x 3/5 x 5/6)

December 1-31, 2012 (155,318 x 1/6)
January 1-June 1, 2013 (155,318 x 5/6)
13
131,344
156,494
25,886
129,432

December 1-31, 2013 (152,788 x 1/6)
Interest Expense
2-9.
(Ohio Company)
Interest
Expense
1,014,730
999,908
983,901
966,613
473,971
463,889
Premium
Amortization
185,270
200,092
216,099
233,387
126,029
136,111
(a)
Effective interest (12,734,120 50,000) x 8%

Nominal interest (10,000,000 x 12%
Amortization of premium for 2009
(b)
Carrying value of bonds on December 31, 2012 (see table)
(c)
Carrying value of bonds called (11,849,272 x 5/10)

Call price/retirement price (5,000,000 x 110%)
Gain on retirement of bonds
(d)
Interest Expense for year 2014 (see table)
(e)
Unamortized premium on bonds payable, Dec. 31, 2014
5,662,496 5,000,000
2-10.
154,084
25,465
308,981
Partial Amortization Table

Interest
Paid
1,200,000
1,200,000
1,200,000
1,200,000
600,000
600,000
Date
01/01/09
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
______
366,262
Bond Carrying
Value
12,684,120
12,498,850
12,298,758
12,082,659
11,849,272
5,798,607
5,662,496
1,014,730
1,200,000
185,270
11,849,272
5,924,636
5,050,000
874,636
463,889
662,496
(Sim Company)
Partial Amortization Table
Date
03/01/09
09/01/09
03/01/10
09/01/10
03/01/11
09/01/11
03/01/12
09/01/12
(a)
Nominal
Interest
Effective
Interest
Premium
Amortization
85,000
85,000
85,000
85,000
85,000
85,000
85,000
88,335
88,485
88,642
88,806
88,977
89,156
89,343
3,335
3,485
3,642
3,806
3,977
4,156
4,343
Carrying amount of the bonds, December 31, 2009
88,335
3,335
1,966,335
2,323
1,968,658
(c)
Retirement price (at face value)

Accrued interest (2,000,000 x 8.5% x 4/12)
Amount of cash paid on June 30, 2012
2,000,000
56,667
2,056,667
(d)
Carrying value, March 1, 2012 (see table)

Amortization through June 30, 2012 (4,343 x 4/6)
Carrying value, June 30, 2012
Retirement price (at face value)
1,985,401
2,895
1,988,296
2,000,000
(b)
Interest expense recorded on September 1, 2009

Discount amortization recorded on September 1, 2009
Carrying amount of the bonds, September 1, 2009
Bond
Carrying value
P1,963,000
1,966,335
1,969,820
1,973,462
1,977,268
1,981,245
1,985,401
1,989,744
Amortization through December 31, 2009 (3,485 x 4/6)
14
Loss on retirement of bonds

2-11.
11,704
(Lim Company)
(a)
Issue price of the bonds

Principal
Due Date
Due
12/31/10
2,000,000
12/31/11
2,000,000
12/31/12
2,000,000
12/31/13
2,000,000
12/31/14
2,000,000
Selling price of bonds
(b)
Principal
Due
Interest
Due
800,000
640,000
480,000
320,000
160,000
Amount
Due
2,800,000
2,640,000
2,480,000
2,320,000
2,160,000
Amortization Table
Interest
Effective
Due
Interest
Due Date
12/31/09
12/31/10
2,000,000
800,000
12/31/11
2,000,000
640,000
12/31/12
2,000,000
480,000
12/31/13
2,000,000
320,000
12/31/14
2,000,000
160,000
1,088,392
882,999
672,159
455,218
231,296
Present Value
PV Factor
0.8929
0.7972
0.7118
0.6355
0.5674
2,500,120
2,104,608
1,765,264
1,474,360
1,225,584
P9,069,936
Discount
Amortization
Carrying
Value, end
P9,069,936
7,358,328
5,601,327
3,793,486
1,928,704
-0-
288,392
242,999
192,159
135,218
71,296*
(c)
12/31/09
12/31/10
12/31/11
2-12.
Cash
Bonds Payable
9,069,936
930,064
Interest Expense
Cash
1,088,392
Bonds Payable
Cash
2,000,000
10,000,000
288,392
800,000
2,000,000
Interest Expense
Cash
882,999
242,999
640,000
Bonds Payable
Cash
(Blue Sapphire Corporation)
(a) Issue price of the bonds
Principal
Due Date
Due
12/31/09
2,000,000
12/31/10
2,000,000
12/31/11
2,000,000
12/31/12
2,000,000
Selling price of bonds
(b)
Due Date
01/01/09
12/31/09
12/31/10
12/31/11
Principal
Due
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
Interest
Due
960,000
720,000
480,000
240,000
Amount
Due
2,960,000
2,720,000
2,480,000
2,240,000
Amortization Table
Interest Due
Effective
Interest
960,000
720,000
480,000
15
695,004
513,804
337,308
Present Value
PV Factor
0.9259
0.8573
0.7938
0.7355
Discount
Amortization
264,996
206,196
142,692
2,740,664
2,331,856
1,968,624
1,646,400
P8,687,544
Carrying
Value, end
8,687,544
6,422,548
4,216,352
2,073,660
12/31/12
2,000,000
240,000
166,340*
73,660
-0-
(c)
01/01/09
12/31/09
Cash
Bonds Payable
Interest Expense
Cash
Bonds Payable
Cash
12/31/10
8,000,000
687,544
695,004
264,996
960,000
2,000,000
2,000,000
Interest Expense
Cash
Bonds Payable
Cash
2-13.
8,687,544
513,804
206,196
720,000
2,000,000
2,000,000
(KFC Delivery Service)

(a)
6,949,800/9,000,000 = 0.7722
This present value factor for three periods is
under the rate of 9% (Table II, Present Value of a Single Payment). Hence,
effective yield for this transaction is 9%.
(b)
Date
09/01/09
08/31/10
08/31/11
08/31/12
Amortization
9% x 6,949,800 = 625,482
9% x 7,575,282 = 681,775
9% x 8,257,057 = 742,943*
Carrying Value of Note

6,949,800
7,575,282
8,257,057
9,000,000
(c)
Interest expense for 2009 (625,482 x 4/12)
208,494
Carrying value, September 1, 2009

Amortization through December 31, 2009
Carrying value, December 31, 2009
6,949,800
280,494
7,158,294
(d)
09/01/09
12/31/09
09/01/10
12/31/10
09/01/11
12/31/11
Land
Discount on Notes Payable
Notes Payable
6,949,800
2,050,200
9,000,000
Interest Expense
208,494
Interest Expense (625,482 -208,494)

416,988

227,258
Interest Expense (681,775 227,258)

454,517

247,648
16
208,494
416,988
227,258
454,517
247,648
09/01/12
2-14.

495,295
495,295
(JFC)
(a)
2009
6,949,800 x 9%= 625,482
625,482 x 4/12
625,482 x 8/12
6,949,800 x 1.09 = 7,575,282
7,575,282 x 9%= 681,775
681,775 x 4/12
681,775 x 8/12
7,575,282 x 1.09 = 8,253,057
8,253,057 x 9%= 743,135
743,135 x 4/12
Totals
2010
2011
208,494
416,988
227,258
454,517
_______
208,494
_______
644,246
247,712
702,229
(b)
Notes Payable
Accrued interest (208,494 + 644,246)
Total, December 31, 2010
6,949,800
852,740
7,802,540
(c)
Non-current Liabilities
Notes Payable
Accrued interest (208,494 + 644,246)
December 31, 2010
6,949,800
852,740
7,802,540
Current Liabilities
Accrued interest
Total, December 31, 2011
6,949,800
1,554,969
8,504,769
(d)
09/01/09
12/31/09
12/31/10
12/31/11
12/31/12
2-15.
Land
Notes Payable
6,949,800
6,949,800
Interest Expense
Interest Payable
208,494
Interest Expense
Interest Payable
644,246
Interest Expense
Interest Payable
702,229
208,494
644,246
702,229
Interest Expense (adjusted)

Interest Payable
Notes Payable
Cash
495,231
1,554,969
6,949,800
9,000,000
(Wendys Catering Service)

(a)
Present value of note (800,000 x 3.2397)
(b)
Date
Principal Due
Amortization
4/01/09
3/31/10
800,000
233,258
3/31/11
800,000
182,252
3/31/12
800,000
126,654
3/31/13
800,000
66,076*
17
2,591,760
Carrying Value of Note
2,591,760
2,025,018
1,407,270
733,924
-0-
(c)
04/01/09
12/31/09
03/31/10
Equipment
Notes Payable
2,591,760
608,240
3,200,000

174,944
Notes Payable
Interest Expense
Cash
800,000
58,314
174,944
800,000
58,314
Discount on Notes Payable (233,258-174,944)
12/31/10
03/31/11

136,689
Notes Payable
Interest Expense
Cash
800,000
45,463
136,689
800,000
45,563
12/31/11
03/31/12

94,991
94,991
Notes Payable
Interest Expense
Cash
800,000
31,663
800,000
31,663
12/31/12
03/31/13

49,557
49,557
Notes Payable
Interest Expense
Cash
800,000
16,519
800,000
16,519
2-16.
(Burgees Food Corporation)

(a)
Principal Payment
Date
04/01/09
03/31/10
03/31/11
03/31/12
03/31/13
Annual Payment
Interest
800,000
800,000
800,000
800,000
233,258
182,252
126,654
66,053
*Adjusted
(b)
04/01/09
Equipment
Notes Payable
12/31/09
04/01/10
566,742
617,748
673,346
733,947*
Carrying Value
2,591,760
2,025,018
1,407,270
733,924
-0-
2,591,760
2,591,760

Interest Payable
174,944
Interest Payable
Notes Payable
174,944
58,314
566,748
18
174,944
Cash
12/31/10
04/01/11
12/31/11
04/01/12
12/31/12
04/01/13
(c)
800,000

Interest Payable
136,689
Interest Payable
Notes Payable
Cash
136,689
45,563
617,748

Interest Payable
Interest Payable
Notes Payable
Cash
Interest Payable
Interest Payable
Notes Payable
Cash
136,689
800,000
94,991
94,991
94,991
31,663
673,346
800,000
49,540
49,540
49,540
16,513
733,947
800,000
Current portion at December 31, 2010

Notes Payable
Interest Payable
617,748
136,689
Noncurrent portion at December 31, 2010

Notes Payable
1,407,270
2-17.
(a)
(b)
(c)
(South Company
Notes Payable
Interest Payable
Cost of Sales
Inventory of Machine Parts
Sales
Gain on Debt Restructuring
(Jay Company)
Bonds Payable
Interest Payable
Ordinary Share
Share Premium
900,000
90,000
650,000
650,000
800,000
190,000
10,000,000
900,000
7,500,000
3,400,000
(Capshell Company)
Notes Payable
Interest Payable
Restructured Notes Payable
Present value of future payments
8,000,000 x 0.7972
= 6,377,600
8,000,000 x 8% x 1.6901 = 1,081,664
Total
7,459,264
Carrying value of liability
11,200,000
Gain on debt restructuring
3,740,736
19
10,000,000
1,200,000
7,459,264
3,740,736
Alternatively, the entry may be recorded as:

Notes Payable
Interest Payable
Discount on Restructured Notes Payable
(d)
(Solid Company)
Notes Payable
Interest Payable
10,000,000
1,200,000
540,736
8,000,000
3,740,736
3,000,000
330,000
3,111,024
218,976
Present value of future payments

3,000,000 x 0.5935
= 1,780,500
3,000,000 x 12% x 3.6959 = 1,330,524
Total
3,111,024
Carrying value of liability
3,330,000
Gain on debt restructuring
218,976
Alternatively, the entry may be recorded as:

Notes Payable
Interest Payable
3,000,000
330,000
Premium on Restructured Notes Payable

MULTIPLE CHOICE QUESTIONS
Theory
MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
D
D
D
C
D
D
D
C
D
C
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20
C
B
B
D
A
A
D
B
A
C
Problems
MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
D
B
A
B
B
C
A
D
MC29
MC30
MC31
MC32
MC33
D
C
A
A
B
MC34
(1,000,000 x 0.38554) + (80,000 x 6.14457) = 877,106

(1,000 x 0.31) + (40 x 11.47) = 768.80
(2,000,000 x 97%) + (2,000,000 x 10% x 3/12) = 1,990,000
(2,000 X 1,040) - 2,000,000 = 80,000
(4,000,000 x 97%) + (4,000,000 x 12% x 3/12) = 4,000,000
1,070,000 - (96% x 1,000,000) = 110,000
1,000,000 x 12% x 1/12 = 10,000
1,000,000 - 30,000 + 50,000 = 1,020,000;
1,020,000 - (40,000 x 20) - 10,000 = 210,000
Using the book value method, no gain or loss is recorded upon conversion
1,032,880 x 10% x 6/12 = 51,644
1,032,880 - {(1,000,000 x 6%) - 51,644}= 1,024,524
1,878,000 - {(10% x 1,878,000) -(2,000,000 x 9%) = 1,885,800
10,000,000 1,145,000 = 8,855,000;
(8,855,000 x 6%) - (10,000,000 x 5%) = 31,300
5,680,000 x 8% x 6/12 = 227,200
20
111,024
3,000,000
218,976
MC35
MC36
MC37
C
D
MC38
MC39
B
D
MC40
MC41
MC42
B
C
MC43
MC44
(2,100,000 x 6%) (2,000,000 x 7%) = 14,000; 2,100,000 14,000 = 2,086,000 BCV;

BCV of P2,086,000 face value of P2,000,000 = P86,000 premium
1,032,880 x 10% = 103,288
1,902,800 x 10% = 190,280 effective interest; 190,280 effective interest nominal interest of
160,000=30,280 discount amortization; carrying value = 1,902,800 + 30,280 principal
payment of 400,000 = 1,533,080
2,400,000 X 12% = 288,000
2,400,000 1,000,000 + 288,000 = 1,688,000
1,688,000 X 12% = 202,560; 1,000,000 202,560 = 797,440
3,000,000 2,400,000 = 600,000; 600,000 288,000 = 312,000
4,500,000 3,000,000 = 1,500,000
6,000,000 + 600,000 = 6,600,000
(6000,000 x 0.6209) +(6000,000 x 8% x 3.7908) = 5,544,984
6,600,000 5,544,984= 1,055,016
6,600,000 [(5,000,000 x .6209) +(5,000,000 x .12 x 3.7908)] =1,221,020
8,000,000 + 640,000 = 8,640,000
(6,000,000 x 0.8573) + (6,000,000 x 10% x 1.7833) = 6,213,780
8,640,000 6,213,780 = 2,426,220
21

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Answers - Chapter 2 Vol 2 2009

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CHAPTER 2

Chapter 2 - Non-Current Liabilities

Interest Expense (298,258 x 4/6)

Cash (5,000 x 20 x 20)

Issue price of bonds with warrants (1,000,000 x 1.03)

Bond price without warrants

Interest Expense for 2009 (887,020 x 12% x 10/12

Bond carrying value, March 1, 2009

Chapter 2 - Non-Current Liabilities

Bond carrying value, December 31, 2009

Cash (1,000 x 30 x 50)

PIC Arising from Bond Conversion Privilege

Carrying value,bonds converted (1,903,865 x 120/200

Face value of bonds converted

Chapter 2 - Non-Current Liabilities

PIC from Unexercised Bond Conversion Privilege

Ordinary Shares (1,000 x 60 x 20)

PIC Arising from Bond Conversion Privilege

Ordinary Share (200 x 40 x 100)

Cash (2,000,000 x 1.04)

PIC from Unexercised Bond Conversion Privilege

Retirement price on account of liability

Carrying value of bonds retired

Chapter 2 - Non-Current Liabilities

Retirement price of bonds (2M x 1.005)

Gain on retirement of bonds

Carrying value of equity cancelled

Gain on cancellation taken to equity

*Adjusted; difference is due to rounding off.

Carrying value, December 1, 2006 (see, table)

Amortization for one month (33,843 x 1/6)

Interest Expense for year 2010

Carrying value of bonds retired on December 1, 2011

Carrying value of bonds retired

Carrying value of remaining bonds, December 1, 2011

Amortization through April 1, 2012 (37,312 x 4/6 x 2/5)

January 1-April 1, 2012 (262,688 x 2/5 x 3/6)

June 1-December 1, 2012

Chapter 2 - Non-Current Liabilities

June 1-December 1, 2013

Effective interest (12,734,120 50,000) x 8%

Carrying value of bonds on December 31, 2012 (see table)

Carrying value of bonds called (11,849,272 x 5/10)

Interest Expense for year 2014 (see table)

Unamortized premium on bonds payable, Dec. 31, 2014

Partial Amortization Table

Carrying amount of the bonds, December 31, 2009

Retirement price (at face value)

Carrying value, March 1, 2012 (see table)

Interest expense recorded on September 1, 2009

Amortization through December 31, 2009 (3,485 x 4/6)

Chapter 2 - Non-Current Liabilities

Loss on retirement of bonds

Issue price of the bonds

Chapter 2 - Non-Current Liabilities

(KFC Delivery Service)

Carrying Value of Note

*Adjusted; difference is due to rounding off.

Interest expense for 2009 (625,482 x 4/12)

Carrying value, September 1, 2009

Interest Expense (625,482 -208,494)

Interest Expense (681,775 x 4/12)

Interest Expense (681,775 227,258)

Interest Expense (742,943 x 4/12)