Homework Answers
Solution a:
| Stuart Company | ||||||||||||
| Financial Statement Model | ||||||||||||
| Event | Balance Sheet | Income Statement | Statement of Cash Flows | |||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenue | - | Expense | = | Net Income | |||
| 1 | $222,480.00 | = | $222,480.00 | + | - | = | $222,480.00 | FA | ||||
| 2a | $0.00 | = | $11,664.00 | + | -$11,664.00 | - | $11,664.00 | = | -$11,664.00 | $0.00 | NA | |
| 2b | -$12,960.00 | = | -$12,960.00 | -$12,960.00 | OA | |||||||
Solution b-e:
Face value of bond = $216,000
Issue price = $216,000*103% = $222,480
Premium on issue of bond = $222,480 - $216,000 = $6,480
Annual interest payment = $216,000 * 6% = $12,960
Annual interest expense = Interest payment - Premium amortized = $12,960 + ($6,480/5) = $11,664
carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1 = $222,480 - $1,296
= $221,184
amount of interest expense reported on the Year 1 income statement = $11,664
Carrying value (face value less discount or plus premium) of the bond liability as of December 31,Year 2 = $221,184 - $1,296 = $219,888
amount of interest expense reported on the Year 2 income statement = $11,664
Add Answer to:
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