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CHAPTER 2
NON-CURRENT LIABILITIES
PROBLEMS
Computations:
At 8%
Issue price = (1,000,000 x 0.6756) + (50,000 x 8.1109)
= 675,600 + 405,545 = 1,081,145
A B C D
Interest Interest Premium Bond
Date Paid Expense Amortization Carrying Value
06/30/09 1,081,145
12/31/09 50,000 43,246 6,754 1,074,391
06/30/10 50,000 42,976 7,024 1,067,367
12/31/10 50,000 42,695 7,035 1,060,332
A = Face value x 5%
B = 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
A B C D
Interest Interest Discount Bond
Date Paid Expense Amortization Carrying Value
06/30/09 962,280
12/31/09 50,000 52,925 2,925 965,205
06/30/10 50,000 53,086 3,086 968,291
12/31/10 50,000 53,256 3,256 971,547
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Chapter 2 - Non-Current Liabilities
(c)
03/01/09 Cash 4,281,152
Bonds Payable 4,000,000
Premium on Bonds Payable 280,752
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Chapter 2 - Non-Current Liabilities
2-4. (Onyx)
(a) Issue price of bonds with warrants (1,000,000 x 1.03) 1,030,000
Bond price without warrants
1,000,000 x 0.3220 322,000
100,000 x 5.6502 565,020 887,020
Value of share warrants 142,980
(c)
07/01/09 Cash 2,000,000
Discount on Bonds Payable 144,240
Bonds Payable 2,000,000
PIC Arising from Bond Conversion Privilege 144,240
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
(b) Carrying value of bonds on December 31, 2012 (see table) 11,849,27
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
(c)
12/31/09 Cash 9,069,936
Discount on Bonds Payable 930,064
Bonds Payable 10,000,000
(c)
01/01/09 Cash 8,687,544
Bonds Payable 8,000,000
Premium on Bonds Payable 687,544
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Chapter 2 - Non-Current Liabilities
(d)
09/01/09 Land 6,949,800
Discount on Notes Payable 2,050,200
Notes Payable 9,000,000
2-14. (JFC)
(a) 2009 2010 2011
6,949,800 x 9%= 625,482
625,482 x 4/12 208,494
625,482 x 8/12 416,988
6,949,800 x 1.09 = 7,575,282
7,575,282 x 9%= 681,775
681,775 x 4/12 227,258
681,775 x 8/12 454,517
7,575,282 x 1.09 = 8,253,057
8,257,057 x 9%= 743,135
743,135 x 4/12 _______ _______ 247,712
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Chapter 2 - Non-Current Liabilities
(d)
09/01/09 Land 6,949,800
Notes Payable 6,949,800
(c)
04/01/09 Equipment 2,591,760
Discount on Notes Payable 608,240
Notes Payable 3,200,000
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
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Chapter 2 - Non-Current Liabilities
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
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Chapter 2 - Non-Current Liabilities
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
MC44 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
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