James Earl R.
Serdan ACCGT 4 BSA 3
Quiz 3
Problem 1:
a.
Notes Payable 900,000 Equipment 600,000
Accrued interest 90,000 Old financial liab. (990,000)
total financial liab: 990,000 gain on extinguishment 390,000
Notes Payable 900,000
Accrued interest Payable 90,000
Equipment 600,000
Gain on extinguishment of debt 390,000
Or
Notes Payable 900,000
Accrued Int. Payable 90,000
Accumulated depreciation 400,000
Equipment 1M
Gain on extinguishment 390k or Gain on disp. 200k
b.
Bonds Payable 10,000,000 FV of OSC (300k x 28) 8,400,000
Accrued Interest 900,000 Total financial liab. (10,900,000)
total financial liab 10,900,000 Gain on extinguishment 2,500,000
Bonds Payable 10,000,000
Accrued Interest 900,000
Ordinary Share Capital 7,500,000
Share Premium 900,000
Gain on extinguishment 2,500,000
c.
PV of Principal 8,000,000 x 0.7972 = 6,377,600
PV of Interest 640,000 x 1.6901 = 1,081,664
PV of new loan 7,459,264
Face value (8,000,000)
Discount 540,736
Principal 10,000,000
Interest (10M x 12%) 1,200,000
CA of old Liability 11,200,000 x 10% = 1,120,000 33%
PV of new loan (7,459,264)
Gain on extinguishment 3,740,736
Interest payment Interest Expense Discount Present Value
540,736.00 7,459,264.00
640,000 895,112.00 255,112.00 7,714,376.00
640,000 925,725.00 285,624.00 8,000,000.00
Loan Payable - old 10,000,000
Accrued Interest 1,200,000
Discount on Loan 540,736
Loan Payable – new 8,000,000
Gain on Extinguishment 3,740,736
Interest expense 895,112
Discount 255,112
Cash 640,000
Interest expense 925,725
Discount 285,624
Cash 640,000
Loan payable 8,000,000
Cash 8,000,000
d.
PV of principal 3,000,000 x 0.5935 = 1,780,500
PV of Interest 360,000 x 3.6959 = 1,330,524
PV of new liab 3,111,024 – 3M = 111,024
CA of old liab (3,330,000) x 10% = 333k 6.68%
Gain on modification 218,976
Accrued Interest Payable 330,000
Premium on notes 111,024
Gain on modification 218,976
Problem 2:
a.
4/1/18 Equipment 2,591,760
Notes payable 2,591,760
12/31/18 Interest expense 233,258 x 9/12 174,944
Interest payable 174,944
3/31/19 Interest expense 233,258 x 3/12 58,314
Notes Payable 566,742
Int. Payable 174,944
Cash 800k
12/31/19 Interest expense 182,252 x 9/12 136,689
Interest payable 136,689
3/31/20 Interest expense 45,653 45,563
Notes Payable 617,748
Int. Payable 136,689
Cash 800,000
12/31/20 Interest exp. 126,654 x 9/12 94,991
Int. Payable 94,991
3/31/21 Interest expense 31,663
Notes Payable 673,346
Int. payable 94,991
Cash 800,000
12/31/21 Interest expense 66,076 x 9/12 49,557
Int payable 49,557
3/31/22 Interest expense 16,519
Notes Payable 733,924
Interest payable 49,557
Cash 800,000
b.
Date Payment Interest Expense Principal Present Value
2,591,760.00
800,000.
3/31/19 00 233,258.00 566,742.00 2,025,018.00
800,000.
3/31/20 00 182,252.00 617,748.00 1,407,270.00
800,000.
3/31/21 00 126,654.00 673,346.00 733,924.00
800,000.
3/31/22 00 66,076.00 733,924.00 -
Current Liabilities: Notes Payable 617,748
Noncurrent liability Notes Payable 673,346 + 733,924 = 1,407,270
Problem 3:
9% 4 periods
a. 800k x 3.2397= 2,591,760
b.
Discount 3.2M-2,591,760= 608,240
4/1/18 Equipment 2,591,760
Discount on notes 608,240
Notes Payable 3,200,000
12/31/18 Interest expense 233,258 x 9/12 174,944
Discount on notes 174,944
3/31/19 Interest expense 233,258 x 3/12 58,314
Notes Payable 800,000
Discount on notes 58,314
Cash 800,000
12/31/19 Interest expense 182,252 x 9/12 136,689
Discount on notes 136,689
3/31/20 Interest expense 45,653 45,563
Notes Payable 800,000
Discount on notes 45,653 45,563
Cash 800,000
12/31/20 Interest exp. 126,654 x 9/12 94,991
Discount on notes 94,991
3/31/21 Interest expense 31,663
Notes Payable 800,000
Discount on notes 31,663
Cash 800,000
12/31/21 Interest expense 66,076 x 9/12 49,557
Discount on notes payable 49,557
3/31/22 Interest expense 16,519
Notes Payable 800,000
Discount on notes payable 16,519
Cash 800,000
Problem 4:
a.
2018 2019 2020 2021
6,949,800 x 9% = 625,482
625,482 x 4/12 208,494
625,482 – 208,494 416,988
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 – 227,258 454,517
7,575,282 x 1.09 = 8,257,057
743,135 x 4/12 247,712
743,135 – 247,712 495,423
Interest expense 208,494 644,246 702,229 495,423
9/1/18 Land 6,949,800
Notes payable 6,949,800
12/31/18 Interest expense 208,494
Accrued Int. payable 208,494
12/31/19 Interest expense 644,246
Accrued int. payable 644,246
12/31/20 Interest expense 702,229
Accrued int. payable 702,229
8/31/21 Notes payable 6,949,800
Accrued interest payable 1,554,969
Interest expense 495,423
Cash 9,000,192
b.
6,949,800 + 208,494 + 644,246 = 7,802,540
c.
2019
Noncurrent liab:
Notes Payable 6,949,800
Interest payable 208,494 + 644,246 852,740
Total 7,802,540
2020
Noncurrent liab:
Notes payable 6,949,800
Interest payable 852,740 + 702,229 1,554,969
Total 8,504,769
Problem 5:
a.
12,734,120 – 50k = 12,684,120
10M x 12% = 1.2M
Annual payment Interest Amortization PV
Jan-18 12,684,120
Dec. 31, 2018 1,200,000 1,014,730 185,270 12,498,850
Dec. 31,2019 1,200,000 999,908 200,092 12,298,758
Dec. 31, 2020 1,200,000 983,901 216,099 12,082,658
Dec. 31, 2021 1,200,000 966,613 233,387 11,849,271
Dec 31, 2021 8,294,490
Dec. 31, 2022 840,000 663,559 176,441 8,118,049
3/10 x 11,849,271 = 3,554,781
7M x
b.
11,849,271
11,849,271 x 3/10 = 3,554,781 CA
3M x 1.10= (3.3M) retirement price
Gain on retirement 254,781
c.
CA
Interest paid Interest expense Amortization
8294490
Dec. 31, 2022 840000 663,559 176441 8118049
d.
8,118,049
