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NAME:
BUSN 5600
WEEK 5 SOLUTION
E7.6.
a. Discount = Principal (Maturity value) – Proceeds = 120,000 – 114,000 6000
Discount rate = Discount / (Principal !i"e) = 6000/(120000#/12) 12$
%. &''ective rate = Discount / (Proceeds !i"e) = 6000/(114000#/12) 12.6$
c. 1. n *u+ust 1, 201 to record loan proceeds
-alance eet nco"e tate"ent
*ssets ia%ilities tocolders3&uity
5et inco"e = evenues 7 &8penses
2. n epte"%er 0, 201 (and eac "ont7end) to record interest e8pense
-alance eet nco"e tate"ent
*ssets ia%ilities tocolders3&uity
5etinco"e
evenues &8penses
. n Dece"%er 1, 201 to record principal repay"ent-alance eet nco"e tate"ent
*ssets ia%ilities tocolders3&uity
5etinco"e
evenues &8penses
Journal entries:
1. August 1, 2013 Debit Credit
Dr. 9as 114000
Dr. Discount on 5otes Paya%le 6000
9r. 5otes Paya%le 120000
!o record te proceeds o' a sort7ter" note paya%le (discount %asis).
2. September 30, 2013 Debit Credit
Dr. nterest &8pense 1200 9r. Discount on 5otes Paya%le 1200
!o record interest e8pense and discount a"orti:ation 'or one "ont.
. December 31, 2013 Debit Credit
Dr. 5otes Paya%le 120000
9r. 9as 120000
!o record te repay"ent o' a sort7ter" note. The discount is amortized or !1,200 each month, and "ould be
ull# amortized at the maturit# date$
E7.12.
a. -alance eet nco"e tate"ent .
*ssets ia%ilities tocolders3 &uity 5et inco"e evenues &8penses
De%it 9redit
Dr. 9as
9r. ;nearned !icet evenue!o record te cas collection 'or season ticet sales "ade in advance.
%. -alance eet nco"e tate"ent .
*ssets ia%ilities tocolders3 &uity 5et inco"e evenues &8penses
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Debit Credit
Dr. ;nearned !icet evenue
9r. !icet evenue!o record revenues earned 'or presentin+ an event.
c. !e unearned revenues are a current lia%ility.
E7.18.
a. *nnual interest pay"ent =
%.c.
7.28.
a. <9* !a8 itoldin+s (e"ployee3s portion) =
&"ployee 9ontri%utions to Pension Plans =
5et Pay = >ross Pay - !otal Deductions
-alance eet nco"e tate"ent.
*ssets ia%ilities tocolders3&uity
5et inco"e evenues &8penses
Dr. a+es &8pense . ....................................???.. 9r. a+es Paya%le (or *ccrued Payroll)
9r. <9* !a8es iteld (e"ployees3 sare)
9r. nco"e !a8es iteld
9r. >roup @ospitali:ation nsurance
9r. &"ployee 9ontri%utions to Pension Plan!o record accrued payroll.
%. !e e"ployer3s payroll ta8es consist o' te 'olloAin+
<9* ta8 Aitoldin+s
<ederal une"ploy"ent co"pensation ta8es
tate une"ploy"ent co"pensation ta8es!otal e"ployer payroll ta8es
-alance eet nco"e tate"ent .
*ssets ia%ilities tocolders3 &uity 5et inco"e evenues &8penses
Dr. Payroll !a8 &8pense
9r. Payroll !a8es Paya%le (or *ccrued Payroll !a8es)???.!o record accrued payroll ta8es.
Alternative entry:
Dr. Payroll !a8 &8pense 9r. <9* !a8es iteld (e"ployer3s sare)
9r. <ederal ;ne"ploy"ent !a8es iteld
9r. tate ;ne"ploy"ent !a8es iteld!o record accrued payroll ta8es.
7.!2.
a. !e se"iannual interest pay"ents on te %onds =
!e ter" o' te %onds is
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e"iannual periods.
!e se"iannual "aret interest rate is =
!e present value o' an annuity o' B6,00,000 'or 40 periods at C$ =
!e present value o' te "aturity value o' B0,000,000 in 40 periods at C$ =
!e proceeds (issue price) o' te %onds = PE o' interest F PE o' "aturity value =
%. !e se"iannual pre"iu" a"orti:ation, strai+t7line %asis =
-alance eet nco"e tate"ent.
*ssets ia%ilities Aners3 &uity 5et inco"e evenues &8penses
De%it 9redit
Dr. nterest &8pense
Dr. Pre"iu" on -onds Paya%le
9r. 9as!o record te se"iannual cas pay"ent and a"orti:ation o' pre"iu".
c.
d.