BALANCE SHEET INCOME STATEMENT a. TRANSACTION CASH ASSET NONCASH ASSETS LIABILIT
ID: 2342611 • Letter: B
Question
BALANCE SHEET INCOME STATEMENT a. TRANSACTION CASH ASSET NONCASH ASSETS LIABILITIES CONTRIB CAPITAL EARNED CAPITAL REVENUES EXPENSES NET INCOME 1 2 3 Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, Remington Corp. issued S500 000 of 15-year, 10% bonds payable for $586,460 yielding an effective interest rte of 8%. Interest is payable semiannually on June 30 and December 31. LO3, 4 E7-31. a. Show computations to confirm the issue price of $586.460 b. Indicate the financial statement effects using the template for (1) bond issuance, (2) semiannual interest payment and premium amortization on June 30 of the first year, and (3) semiannual interest payment and premium amortization on December 31 of the first year.Explanation / Answer
Part - (a) Issue price of $586,460 Year Cash flows Present value factor @4% (8%/2) Present values 1 25,000 0.96153846 24,038 2 25,000 0.92455621 23,114 3 25,000 0.88899636 22,225 4 25,000 0.85480419 21,370 5 25,000 0.82192711 20,548 6 25,000 0.79031453 19,758 7 25,000 0.75991781 18,998 8 25,000 0.73069021 18,267 9 25,000 0.70258674 17,565 10 25,000 0.67556417 16,889 11 25,000 0.64958093 16,240 12 25,000 0.62459705 15,615 13 25,000 0.60057409 15,014 14 25,000 0.57747508 14,437 15 25,000 0.55526450 13,882 16 25,000 0.53390818 13,348 17 25,000 0.51337325 12,834 18 25,000 0.49362812 12,341 19 25,000 0.47464242 11,866 20 25,000 0.45638695 11,410 21 25,000 0.43883360 10,971 22 25,000 0.42195539 10,549 23 25,000 0.40572633 10,143 24 25,000 0.39012147 9,753 25 25,000 0.37511680 9,378 26 25,000 0.36068923 9,017 27 25,000 0.34681657 8,670 28 25,000 0.33347747 8,337 29 25,000 0.32065141 8,016 30 25,000 0.30831867 7,708 30 500,000 0.30831867 154,159 Issue price 586,460 Part - (b) Balance sheet Income statement Cash asset + Non cash asset = Liabilities+ Contrib Capital Earned Capital Revenue- Expenses= Net Income 1 586,460 586,460 2 (25,000) 1,542 23,458 (23,458) 3 (25,000) 1,603 23,397 (23,397) Premium on bonds = (586,460-500,000) = $86,460 1st year Interest payment = 25,000 Interest accrued = 586,460*4% = 23,458 Premium amortized = (25,000-23,458) = 1,542 2nd year Interest payment = 25,000 Interest accrued = (586,460-1,542)*4% = 23,397 Premium amortized = (25,000-23,397) = 1,603
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.