Chapter 1 Problem 12-26 to 30
Problem 12-26 Answer A
Bond year Bond outstanding Fraction Amortization
04/01/2007 – 03/31/2008 4,000,000 4/10 80,000
04/01/2008 – 03/31/2009 3,000,000 3/10 60,000
04/01/2009 – 03/31/2010 2,000,000 2/10 40,000
04/01/2010 – 03/31/2011 1,000,000 1/10 20,000
10,000,000 200,000
Interest for the year 2008:
From January 1 to March 31, 2008 (4,000,000 x 12% x 3/12) 120,000
From April 1 to December 31, 2008 (3,000,000 x 12% x 9/12) 270,000 390,000
Amortization of discount for year 2008:
From January 1 to March 31, 2008 (80,000 x 3/12) 20,000
From April 1 to December 31, 2008 (60,000 x 9/12) 45,000 65,000
Interest income for year 2008 455,000
Problem 12-27 Answer D
Interest income for 2008 (3,756,000 x 10%) 375,600
Problem 12-28 Answer D
Interest accrued from July 1 to December 31, 2008 (5,000,000 x 8% x 6/12) 200,000
Problem 12-29 Answer C
Interest received (1,000,000 x 10% x 6/12) 50,000
Interest income (1,198,000 x 8% x 6/12) 47,920
Premium amortization 2,080
Acquisition cost – July 1, 2008 1,198,000
Premium amortization ( 2,080)
Book value – December 31, 2008 1,195,920
Problem 12-30 Answer A
Interest accrued (1,000,000 x 8% x 6/12) 40,000
Interest income (906,000 x 10% x 6/12) 45,300
Discount amortization 5,300
Acquisition cost – July 1, 2008 (946,000 - 40,000) 906,000
Discount amortization 5,300
Book value – December 31, 2008 911,300
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