Celeron Company 0 Issue price of bonds without conversion privilege 0... b Amortization TableDate Interest Paid Expense Interest Amortization Discount Carrying Bond Value *Adjusted; diff
Trang 1CHAPTER 2 NON-CURRENT LIABILITIES
PROBLEMS 2-1 (Ruby Corporation)
Premium/discount amortization in
Bond carrying value at December 31,
Premium/discount amortization in
Bond carrying value at December 31,
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
D Bond Carrying Value
At 11%
Issue price = (1,000,000 x 0.5854) + (50,000 x 7.5376)
= 585,430 + 376,880 = 962,280
Date
A Interest Paid
B Interest Expense
C Discount Amortization
D Bond Carrying Value
2-2 (Fire Company)
Trang 2(a) Issue price
Present value of face value (4,000,000 x
Present value of interest payments (320,000 x
2
(b) Amortization Table
Date Interes t Paid Expense Interest Amortization Premium Bond Carrying Value
8/31/09 320,00
2/28/10 320,00
8/31/10 320,00
2/28/11 320,00
(c)
2
0
Trang 32-3 (Metal Corporation)
0
0
0
0
2-4 (Onyx)
(a) Issue price of bonds with warrants (1,000,000 x
0 Bond price without warrants
(b) Interest Expense for 2009 (887,020 x 12% x
10/12
88,702
Amortization through December 31, 2009
Bond carrying value, December 31, 2009
892,389
0
2-5 (Celeron Company)
0 Issue price of bonds without conversion privilege
0
Trang 4(b) Amortization Table
Date Interest Paid Expense Interest Amortization Discount Carrying Bond
Value
*Adjusted; difference is due to rounding off.
(c)
0
0
PIC Arising from Bond Conversion Privilege 144,240
0 PIC Arising from Conversion
Carrying value,bonds converted (1,903,865 x
9
0
Value of equity converted (144,240 x 120/200)
86,544
Par value of ordinary shares issued (120 x 80 x
Trang 506/30/13 Interest Expense 92,752
PIC Arising from Bond Conversion Privilege 57,69
6
PIC from Unexercised Bond Conversion Privilege 57,696 (144,240 – 86,544)
2-6 (Iron Company)
PIC Arising from Bond Conversion Privilege(320,000 x
2-7 (Lim Corporation)
0
0
PIC Arising from Bond Conversion
0 Premium on Bonds Payable (5,000 x
PIC Arising from Bond Conversion
300,000 x 1/5 = 60,000
0 Premium on Bonds Payable (5,000 x
2/5)
20,000
PIC Arising from Bond Conversion
0
PIC from Unexercised Bond Conversion
Trang 6Retirement price 2,080,00
0
Retirement price on account of liability
0
Retirement price on account of
Carrying value of bonds retired
0
Unamortized premium (50,000 x
2,020,00
0
Retirement price of bonds (2M x
0 Gain on retirement of bonds 10,000 Carrying value of equity
cancelled
120,000
Retirement price on account of
Gain on cancellation taken to
2-8 (Emerald Corporation)
The following table may facilitate the computations required in this problem.
Date Interes t Paid Expense Interest Amortization Premium Carrying Value Bond
*Adjusted; difference is due to rounding off.
(a) Carrying value, December 1, 2006 (see,
5
Trang 7Amortization for one month (33,843 x 1/6)
5,640
5 (b) Interest Expense for year 2010
(c) Carrying value of bonds retired on December 1,
2011
7
Amortization through April 1, 2012 (37,312 x 4/6 x
Carrying value of bonds retired on April 1, 2012
2,091,55
7
7
0
(e) Carrying value of remaining bonds, December 1,
Amortization through December 31, 2011 (24,682 x
Carrying value of remaining bonds, December 31,
January 1-April 1, 2012 (262,688 x 2/5 x 3/6) 52,538
On remaining bonds
January 1-June 1, 2012 (262,688 x 3/5 x 5/6) 131,344
2-9 (Ohio Company) Partial Amortization Table
Date Interest Paid Expense Interest Amortization Premium Bond Carrying Value
12/31/09 1,200,00
12/31/10 1,200,00
12/31/11 1,200,00
12/31/12 1,200,00
Trang 812/31/13 600,00
12/31/14 600,00
(b) Carrying value of bonds on December 31, 2012 (see
2 (c) Carrying value of bonds called (11,849,272 x
5/10)
5,924,636 Call price/retirement price (5,000,000 x 110%) 5,050,000
(e) Unamortized premium on bonds payable, Dec 31,
2014
2-10 (Sim Company)
Partial Amortization Table
Date Interest Nominal Effective Interest Amortization Premium Carrying value Bond
(a) Interest expense recorded on September 1,
2009
88,335 Discount amortization recorded on September
1, 2009
3,335 (b) Carrying amount of the bonds, September 1,
Amortization through December 31, 2009 (3,485 x
Carrying amount of the bonds, December 31,
0
7
1 Amortization through June 30, 2012 (4,343 x 2,895
Trang 96
0
2-11 (Lim Company)
(a) Issue price of the bonds
Due Date Principal Due Interest Due Amount Due PV
Factor
Present Value 12/31/10 2,000,00
12/31/11 2,000,00
12/31/12 2,000,00
12/31/13 2,000,00
12/31/14 2,000,00
P9,069,936
Due Date Principal Due Interest Due Effective Interest Amortizatio Discount
n
Carrying Value, end 12/31/09
P9,069,93 6
12/31/10 2,000,00
12/31/11 2,000,00
12/31/12 2,000,00
12/31/13 2,000,00
12/31/14 2,000,00
0 160,000 231,296 71,296*
-0-*Adjusted; difference is due to rounding off.
(c)
6
0
2
0
Trang 10Cash 2,000,000
0
2-12 (Blue Sapphire Corporation)
(a) Issue price of the bonds
Due Date Principal Due Interest Due Amount Due PV
Factor
Present Value 12/31/09 2,000,00
12/31/10 2,000,00
12/31/11 2,000,00
12/31/12 2,000,00
P8,687,544
Due Date Principal Due Interest Due Effectiv e
Interest
Discount Amortizatio n
Carrying Value, end
12/31/09 2,000,00
12/31/10 2,000,00
12/31/11 2,000,00
12/31/12 2,000,00
-0-*Adjusted; difference is due to rounding off.
(c)
4
0
0
0
Trang 11Cash 720,000
0
0 2-13 (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%.
Note
*Adjusted; difference is due to rounding off.
0
4 (d)
0
0
0
09/01/10 Interest Expense (625,482 -208,494) 416,988
12/31/10 Interest Expense (681,775 x 4/12) 227,258
09/01/11 Interest Expense (681,775 –
12/31/11 Interest Expense (742,943 x 4/12) 247,648
09/01/12 Interest Expense (742,943 –
247,648)
495,295
Trang 122-14 (JFC)
6,949,800 x 9%= 625,482
6,949,800 x 1.09 = 7,575,282
7,575,282 x 9%= 681,775
7,575,282 x 1.09 = 8,253,057
8,257,057 x 9%= 743,135
(c) Non-current Liabilities
(d)
0
0
9
0
0 2-15 (Wendy’s Catering Service)
(a) Present value of note (800,000 x 3.2397)
2,591,760
(b) Date Principal Due Amortization
Carrying Value of Note
Trang 133/31/10 800,000 233,258 2,025,018
3/31/12 800,000 126,654 733,924 3/31/13 800,000 66,076*
-0-*Adjusted; difference is due to rounding off.
(c)
0
0 12/31/09 Interest Expense (233,258 x 9/12) 174,944
Discount on Notes Payable
12/31/10 Interest Expense (182,252 x 9/12) 136,689
Discount on Notes Payable
Discount on Notes Payable
Discount on Notes Payable
2-16 (Burgee’s Food Corporation)
(a)
Principal Payment Carrying Value
Trang 1403/31/12 800,000 126,654 673,346 733,924
-0-*Adjusted (b)
0
0 12/31/09 Interest Expense (233,258 x 9/12) 174,944
Interest Expense (233,258 – 174,944) 58,314
12/31/10 Interest Expense (182,252 x 9/12) 136,689
Interest Expense (182,252 – 136,689) 45,563
Interest Expense (126,654 – 94,991) 31,663
Interest Expense (66,053 – 49,540) 16,513
(c) Current portion at December 31,
2010
Noncurrent portion at December 31, 2010
0 2-17.
Trang 15Gain on Debt Restructuring 190,000
0
0
0
0
4
6
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
Alternatively, the entry may be recorded as:
0
Discount on Restructured Notes
0
6
4
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
3,330,000
218,976
Alternatively, the entry may be recorded
Trang 16Premium on Restructured Notes
0
MULTIPLE CHOICE QUESTIONS Theory
Problems
MC21 D (1,000,000 x 0.38554) + (80,000 x 6.14457) = 877,106
MC22 B (1,000 x 0.31) + (40 x 11.47) = 768.80
MC23 A (2,000,000 x 97%) + (2,000,000 x 10% x 3/12) = 1,990,000
MC24 B (2,000 X 1,040) - 2,000,000 = 80,000
MC25 B (4,000,000 x 97%) + (4,000,000 x 12% x 3/12) = 4,000,000
MC26 C 1,070,000 - (96% x 1,000,000) = 110,000
MC27 A 1,000,000 x 12% x 1/12 = 10,000
MC28 D 1,000,000 - 30,000 + 50,000 = 1,020,000;
1,020,000 - (40,000 x 20) - 10,000 = 210,000 MC29 D Using the book value method, no gain or loss is recorded upon conversion MC30 C 1,032,880 x 10% x 6/12 = 51,644
MC31 A 1,032,880 - {(1,000,000 x 6%) - 51,644}= 1,024,524
MC32 A 1,878,000 - {(10% x 1,878,000) -(2,000,000 x 9%) = 1,885,800
MC33 B 10,000,000 – 1,145,000 = 8,855,000;
(8,855,000 x 6%) - (10,000,000 x 5%) = 31,300 MC34 C 5,680,000 x 8% x 6/12 = 227,200
MC35 A (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 MC36 C 1,032,880 x 10% = 103,288
MC37 D 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
MC38 B 2,400,000 X 12% = 288,000
MC39 D 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 MC40 B 3,000,000 – 2,400,000 = 600,000; 600,000 – 288,000 = 312,000
MC41 C 4,500,000 – 3,000,000 = 1,500,000
MC42 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
MC43 6,600,000 – [(5,000,000 x 6209) +(5,000,000 x 12 x 3.7908)] =1,221,020
Trang 17MC44 B 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