Escolar Documentos
Profissional Documentos
Cultura Documentos
NON-CURRENT LIABILITIES
PROBLEMS
2-1.
(Ruby Corporation)
At 8%
Bond issue price
Nominal interest for 2012
Interest expense for 2012
Premium/discount amortization in 2012
Bond carrying value at December 31, 2012
Nominal interest for 2013
Interest expense for 2013
Premium/discount amortization in 2013
Bond carrying value at December 31, 2013
1,081,145
50,000
43,246
6,754
1,074,391
100,000
85,671
14,059
1,060,332
At 12%
926,405
50,000
55,584
5,584
931,989
100,000
112,193
12,193
944,182
Computations:
At 8%
Issue price = (1,000,000 x 0.6756) + (50,000 x 8.1109)
= 675,600 + 405,545 = 1,081,145
Date
A
Interest
Paid
B
Interest
Expense
C
Premium
Amortization
06/30/12
12/31/12
06/30/13
12/31/13
50,000
50,000
50,000
43,246
42,976
42,695
6,754
7,024
7,035
A
B
=
=
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 12%
Issue price = (1,000,000 x 0.5584) + (50,000 x 7.3601)
= 558,400 + 368,005 = 926,405
Date
A
Interest
Paid
B
Interest
Expense
C
Discount
Amortization
D
Bond
Carrying Value
06/30/12
12/31/12
06/30/13
12/31/13
50,000
50,000
50,000
55,584
55,919
56,274
5,584
5,919
6,274
926,405
931,989
937,908
944,182
Issue price
Present value of face value
(4,000,000 x 0.6756)
Present value of interest payments (200,000 x 8.1109)
Issue price
P2,702,400
1,622,180
P4,324,580
(b)
Amortization Table
Date
3/01/12
8/31/12
2/28/13
8/31/13
2/28/14
(c)
03/01/12
08/31/12
12/31/12
02/28/13
2-3.
Interest
Expense
172,983
171,903
170,779
169,610
Premium
Amortization
27,017
28,097
29,221
30,390
Cash
Bonds Payable
Premium on Bonds Payable
Bond Carrying
Value
4,324,580
4,297,563
4,269,466
4,240,245
4,209,855
4,324,580
4,000,000
324,580
Interest Expense
Premium on Bonds Payable
Cash
172,983
27,017
114,602
18,731
200,000
133,333
57,301
9,366
133,333
200,000
(Metal Corporation)
Issue price of bonds and warrants 5,000,000 x 1.08
MV of bonds without warrants
5,000,000 x 1.02
Value assigned to warrants
(a)
(b)
2-4.
Interest
Paid
200,000
200,000
200,000
200,000
(Onyx)
(a)
5,400,000
5,100,000
P 300,000
Cash
Premium on Bonds Payable
Bonds Payable
Share Warrants Outstanding
5,400,000
1,400,000
300,000
100,000
5,000,000
300,000
1,000,000
700,000
12
322,000
565,020
1,030,000
887,020
142,980
(b)
(c)
(d)
2-5.
887,020
88,702
83,333
5,369
892,389
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
1,134,800
200,000 x 3.6048
720,960
Allocation to equity
(b)
88,702
2,000,000
1,855,760
144,240
Amortization Table
Interest
Interest
Date
Paid
Expense
07/01/12
06/30/13
200,000
222,691
06/30/14
200,000
225,414
06/30/14
06/30/14
06/30/15
80,000
91,386
06/30/16
80,000
92,572
06/30/17
80,000
94,316*
*Adjusted; difference is due to rounding off.
(c)
07/01/12
Premium
Amortization
22,691
25,414
Cash
Discount on Bonds Payable
Bonds Payable
11,386
12,752
14,316
2,000,000
144,240
2,000,000
144,240
06/30/13
06/30/14
06/30/14
Interest Expense
Discount on Bonds Payable
Cash
222,691
Interest Expense
Discount on Bonds Payable
Cash
225,414
Bonds Payable
PIC Arising from Conversion Privilege
Discount on Bonds Payable
Ordinary Share
Share Premium
13
Bond Carrying
Value
1,855,760
1,878,451
1,903,865
(1,142,319)
761,546
772,932
785,684
800,000
22,691
200,000
25,414
200,000
1,200,000
86,544
57,681
960,000
268,863
06/30/15
06/30/16
06/30/17
06/30/17
Interest Expense
Discount on Bonds Payable
Cash
91,386
Interest Expense
Discount on Bonds Payable
Cash
92,752
Interest Expense
Discount on Bonds Payable
Cash
94,316
1,142,319
1,200,000
57,681
86,544
960,000
11,386
80,000
12,752
80,000
14,316
80,000
Bonds Payable
800,000
57,696
Cash
PIC from Unexercised Bond Conversion Privilege
800,000
57,696
(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
1,200,000
877,000
(Lim Corporation)
(a)
Cash
Bonds Payable
Premium on Bonds Payable
5,500,000
5,000,000
200,000
300,000
(b)
Bonds Payable
Premium on Bonds Payable (5,000 x 1/5)
PIC Arising from Bond Conversion Privilege
1,000,000
10,000
60,000
Bonds Payable
Premium on Bonds Payable (5,000 x 2/5)
PIC Arising from Bond Conversion Privilege
14
800,000
270,000
2,000,000
20,000
120,000
2,080,000
10,000
50,000
Retirement price
2,080,000
2,000,000 x 1.005
Retirement price on account of equity
2,010,000
70,000
2,000,000
___20,000
2,020,000
2,010,000
10,000
120,000
70,000
50,000
(Emerald Corporation)
The following table may facilitate the computations required in this problem.
Date
12/01/12
06/01/13
12/01/13
06/01/14
12/01/14
06/01/15
12/01/15
06/01/16
12/01/16
06/01/17
12/01/17
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
(c)
224,420
267,769
_44,360
536,549
5,253,767 x 2/5
Amortization through April 1, 2015 (37,312 x 4/6 x 2/5)
5,323,145
____5,640
5,317,505
15
2,101,507
____9,950
2,091,557
2,091,557
2,080,000
11,557
(e)
(f)
On bonds redeemed:
January 1-April 1, 2013 (262,688 x 2/5 x 3/6)
3,106,367
4,114
3,102,253
2015
52,538
2016
On remaining bonds
January 1-June 1, 2013 (262,688 x 3/5 x 5/6)
(Ohio Company)
Date
01/02/12
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
131,344
156,494
25,886
______
366,262
129,432
154,084
25,465
308,981
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
Bond Carrying
Value
12,684,120
12,498,850
12,298,758
12,082,659
11,849,272
5,798,607
5,662,496
(a)
(b)
(c)
(d)
(e)
5,798,605 5,000,000
1,014,730
1,200,000
185,270
11,849,272
5,924,636
5,500,000
424,636
473,971
798,605
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
16
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
(a)
(b)
88,335
3,335
1,966,335
2,323
1,968,658
(c)
2,000,000
56,667
2,056,667
(d)
1,985,401
2,895
1,988,296
2,000,000
11,704
(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
12/31/12
12/31/13
2,000,000
800,000
1,088,392
12/31/14
2,000,000
640,000
882,999
12/31/15
2,000,000
480,000
672,159
12/31/16
2,000,000
320,000
455,218
12/31/17
2,000,000
160,000
231,296
*Adjusted; difference is due to rounding off.
PV Factor
0.8929
0.7972
0.7118
0.6355
0.5674
Present
Value
2,500,120
2,104,608
1,765,264
1,474,360
1,225,584
P9,069,936
Discount
Amortization
288,392
242,999
192,159
135,218
71,296*
Carrying
Value, end
P9,069,936
7,358,328
5,601,327
3,793,486
1,928,704
-0-
(c)
12/31/12
12/31/13
12/31/14
Cash
Discount on Bonds Payable
Bonds Payable
9,069,936
930,064
Interest Expense
Discount on Bonds Payable
Cash
1,088,392
Bonds Payable
Cash
2,000,000
10,000,000
288,392
800,000
2,000,000
Interest Expense
Discount on Bonds Payable
Cash
Bonds Payable
Cash
882,999
242,999
640,000
2,000,000
2,000,000
17
Principal
Due
2,000,000
2,000,000
2,000,000
2,000,000
of bonds
(b)
Principal
Due
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
Effective
Due
Interest
Due Date
01/01/12
12/31/12
2,000,000
960,000
12/31/13
2,000,000
720,000
12/31/14
2,000,000
480,000
12/31/15
2,000,000
240,000
*Adjusted; difference is due to rounding off.
PV Factor
0.9259
0.8573
0.7938
0.7355
Present
Value
2,740,664
2,331,856
1,968,624
1,646,400
P8,687,544
Discount
Amortization
695,004
513,804
337,308
166,340*
264,996
206,196
142,692
73,660
Carrying
Value, end
8,687,544
6,422,548
4,216,352
2,073,660
-0-
(c)
01/01/12
12/31/12
Cash
Bonds Payable
Premium on Bonds Payable
Interest Expense
Premium on Bonds Payable
Cash
Bonds Payable
Cash
12/31/13
8,687,544
8,000,000
687,544
695,004
264,996
960,000
2,000,000
2,000,000
Interest Expense
Premium on Bonds Payable
Cash
Bonds Payable
Cash
513,804
206,196
720,000
2,000,000
2,000,000
Date
09/01/12
08/31/13
08/31/14
08/31/15
Amortization
9% x 6,949,800 = 625,482
9% x 7,575,282 = 681,775
9% x 8,257,057 = 742,943*
18
(c)
208,494
12/31/12
09/01/13
12/31/13
09/01/14
12/31/14
08/31/15
Land
Discount on Notes Payable
Notes Payable
6,949,800
208,494
7,158,294
6,949,800
2,050,200
9,000,000
Interest Expense
Discount on Notes Payable
208,494
416,988
227,258
454,517
247,648
495,295
208,494
Notes Payable
Cash
416,988
227,258
454,517
247,648
495,295
9,000,000
9,000,000
2-14. (JFC)
(a)
2012
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 = 8,257,057
8,257,057 x 9%= 743,135
743,135 x 4/12
Totals
2013
2014
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, 2013
6,949,800
852,740
7,802,540
(c)
Non-current Liabilities
Notes Payable
Accrued interest (208,494 + 644,246)
December 31, 2013
6,949,800
852,740
7,802,540
19
Current Liabilities
Notes Payable
Accrued interest
Total, December 31, 2014
6,949,800
1,554,969
8,504,769
(d)
09/01/12
12/31/12
12/31/13
12/31/14
12/31/15
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
Date
Principal Due
4/01/12
3/31/13
3/31/14
3/31/15
3/31/16
*Adjusted;
Amortization
800,000
233,258
800,000
182,252
800,000
126,654
800,000
66,076*
difference is due to rounding off.
495,423
1,554,969
6,949,800
9,000,192
2,591,760
Carrying Value of Note
2,591,760
2,025,018
1,407,270
733,924
-0-
(c)
04/01/12
12/31/12
03/31/13
Equipment
Discount on Notes Payable
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
12/31/13
03/31/14
136,689
Notes Payable
Interest Expense
Cash
800,000
45,463
20
136,689
800,000
45,563
12/31/14
03/31/15
94,991
94,991
Notes Payable
Interest Expense
Cash
800,000
31,663
800,000
31,663
12/31/15
03/31/16
49,557
49,557
Notes Payable
Interest Expense
Cash
800,000
16,519
800,000
16,519
Annual Payment
Interest
Principal
Payment
800,000
800,000
800,000
800,000
233,258
182,252
126,654
66,076*
566,742
617,748
673,346
733,924
*Adjusted
(b)
04/01/12 Equipment
Notes Payable
12/31/12
04/01/13
12/31/13
04/01/14
12/31/14
04/01/15
12/31/15
Carrying Value
2,591,760
2,025,018
1,407,270
733,924
-0-
2,591,760
2,591,760
174,944
Interest Payable
Interest Expense (233,258 174,944)
Notes Payable
Cash
174,944
58,314
566,748
136,689
Interest Payable
Interest Expense (182,252 136,689)
Notes Payable
Cash
136,689
45,563
617,748
21
174,944
800,000
136,689
800,000
94,991
94,991
94,991
31,663
673,346
800,000
49,557
49,557
04/01/14
(c)
Interest Payable
Interest Expense (66,076 49,557)
Notes Payable
Cash
49,557
16,519
733,924
800,000
617,748
136,689
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
(Joy Company)
Bonds Payable
Interest Payable
Ordinary Share
Share Premium 30,000 x (30-25)
Gain on Debt Restructuring
(Capshell Company)
Notes Payable
Interest Payable
Restructured Notes Payable
Gain on Debt Restructuring
(see computations and explanation below)
22
900,000
90,000
650,000
650,000
800,000
190,000
10,000,000
900,000
7,500,000
150,000
3,250,000
10,000,000
1,200,000
7,332,384
3,867,616
Present
value
of
future
payments
at
incremental borrowing rate, considering its
credit rating:
8,000,000 x 0.7831
= 6,264,800
8,000,000 x 8% x 1.6681
= 1,067,584
Total
7,332,384
Carrying value of the old
11,200,000
Gain on debt restructuring
3,867,616
(d)
8,000,000
3,867,616
(Solid Company)
Notes Payable
Interest Payable
Restructured Notes Payable
Deferred Gain on Debt Restructuring
3,111,024
218,976
3,000,000
330,000
23
be
3,000,000
330,000
111,024
3,000,000
218,976
D
D
D
C
D
D
D
C
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC9
D
MC10
C
Problems
MC19
MC20
MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
B
D
B
A
B
B
C
A
B
D
MC31
MC32
MC33
MC34
MC35
C
A
A
B
MC36
MC37
C
A
MC38
MC39
C
D
MC40
MC41
B
D
MC42
MC43
MC44
MC45
B
A
D
D
MC46
MC47
C
B
MC48
C
B
B
D
B
D
D
B plus the PV of all..at
effective rate
(supposedly A)
A
D
24
25