FA2-Asgns9.doc

Financial Accounting 2Suggested solutions 2 9 1 LESSON 9 Suggested solutions Question 1 15 marks Computer solution a 8 marks 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 ABCDEF Maturity amount of the bonds 600 000 Date of the bondsApril 1 2005 Maturity dateMarch 31 2009 Issue date October 1 2005 Stated annual interest rate6 00 Interest rate per period3 00 Price or effective interest rate annual 7 00 Interest rate per period3 50 Interest payment datesApril 1 and October 1 Number of interest periods per year2 Total number of interest periods 7 Total sale price of bonds Oct 1 2005 581 656 42 43 44 45 46 47 48 49 E 18 344 15 723 13 103 10 482 7 862 5 241 2 621 0 63 DEF 40 88241 241 22 F PV F16 F20 F8 F14 F8 1 F16 F20 32 33 34 35 36 37 38 39 DE 18 344 2 35815 986 2 44113 545 2 52611 019 2 6148 405 2 7065 699 2 8012 899 2 8990 Suggested solutions 2 9 2Financial Accounting Liabilities students should state this assumption if A is offered as a solution 5 C 6 B 7 C 8 BThe answer following the lesson notes criteria is B so B is the acceptable answer If experience suggests that one should be pessimistic about the success of appeals on the local tax agency rulings A is also an acceptable response Financial Accounting 2Suggested solutions 2 9 5 Question 4 13 marks Requirement 1 4 marks Inventory merchandise or purchases 5 000 17 724 22 724 Discount on notes payable 2 276 Cash 5 000 Note payable 20 000 Computation Principal 20 000 PVIF 15 2 0 75614 15 123 Interest 20 000 8 PVIFA 15 2 1 62571 2 601 Present value of note 17 724 Discount 20 000 17 724 2 276 Requirement 2 6 marks 1 mark each for a and b 2 marks each for c and d a Amount of cash interest paid each December 31 20 000 8 1 600 b Total interest expense for the two year period 20 000 3 200 17 724 or see below 5 476 c Amount of interest reported on income statement for 20X5 17 724 15 2 659 d Amount of net liability reported on statement of financial position December 31 20X5 excluding accrued interest see debt amortization schedule 18 783 Debt Amortization Schedule not required Carrying ValueCashInterest ExpenseIncreaseCarrying Value BalancePayments 15 in BalanceBalance Start 17 724 20X5 1 600 2 659 1 059 18 783 20X61 6002 8171 21720 000 3 200 5 476 Requirement 3 3 marks Entries for Sable Year End 20X520X6Maturity Interest expense 2 6592 817 Notes payable 20 000 Discount 1 0591 217 Cash