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 Topic: Becker homework ( Topic Closed)
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berry0331
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| Posted: 25 Apr 2012 at 09:00 | IP Logged
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I basically don't get the problem :( Does anyone know how to do this?
Question CPA-05456
Main, a pharmaceutical company, leased office space from Ash. Main took
possession and began to use the building on July 1, Year 1. Rent was due
the first day of each month. Monthly lease payments escalated over the 5-
year period of the lease as follows:
Period
July 1, Year 1 - September 30, Year 1, lease payment $0 - rent abatement
during move-in, construction
October 1, Year 1 - June 30, Year 2, lease payment 17,500
July 1, Year 2 - June 30, Year 3, lease payment 19,000
July 1, Year 3 - June 30, Year 4, lease payment 20,500
July 1, Year 4 - June 30, Year 5, lease payment 23,000
July 1, Year 5 - June 30, Year 6, lease payment 24,500
What amount would Main show as deferred rent expense at December 31,
Year 4?
a. $50,658 b. $52,580 c. $68,575 d. $71,550
Choice "d" is correct
So what if the question asked that the bonds issued at a discount,
what would the answer be? Also, for the year-end bond interest accrual,
if the question asked for the year end accrual for interest, do I simply use
the carrying amount of the bond to multiply the effective interest rate
based on the allocated months until year end, or I have to take the
coupon payment with assigned months..... so confusing..
Question CPA-06932
When the effective interest method of amortization is used for bonds
issued at a premium, the amount of interest payable for an interest period
is calculated by multiplying the:
a. Face value of the bonds at the beginning of the period by the
contractual interest rate.
b. Face value of the bonds at the beginning of the period by the effective
interest rates.
c. Carrying value of the bonds at the beginning of the period by the
contractual interest rate.
d. Carrying value of the bonds at the beginning of the period by the
effective interest rates.
Explanation
Choice "a" is correct. The interest payable on a bond is calculated by
taking the face value of the bond at the beginning of the period and
multiply this amount by the contractual interest rate.
Choice "b" is incorrect. This calculation is not used in bond accounting.
Choice "c" is incorrect. This calculation is not used in bond accounting.
Choice "d" is incorrect. This is the formula used to calculate the interest
expense on a bond.
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astone
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Location: United States
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| Posted: 25 Apr 2012 at 12:11 | IP Logged
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| Lease Dates |
Months |
Payment |
Total |
Periods |
Paid |
Expensed |
| 01.01 - 09.01 |
3 |
0 |
- |
3 |
- |
60,075 |
| 10.01 - 07.02 |
9 |
17,500 |
157,500 |
9 |
157,500 |
180,225 |
| 07.02 - 07.03 |
12 |
19,000 |
228,000 |
12 |
228,000 |
240,300 |
| 07.03 - 07.04 |
12 |
20,500 |
246,000 |
12 |
246,000 |
240,300 |
| 07.04 - 07.05 |
12 |
23,000 |
276,000 |
6 |
138,000 |
120,150 |
| 07.05 - 07.06 |
12 |
24,500 |
294,000 |
0 |
- |
- |
| Total Lease |
60 |
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1,201,500 |
42 |
769,500 |
841,050 |
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| Monthly Expense = 20,025 (1,201,500 / 60) |
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| Step 1: |
Total Lease $ |
1,201,500 |
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| Step 2: |
Lease Term |
5 yrs - 60 mos. |
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| Step 3: |
Month Expense |
20,025 |
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| Step 4: |
Expense 12.31.04 |
841,050 |
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| Step 5: |
Payments 12.31.04 |
769,500 |
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| Step 6: |
Deferred 12.31.04 |
71,550 |
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astone
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| Posted: 26 Apr 2012 at 20:44 | IP Logged
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Below are the journal entries to accrue interest payable at a premium and a discount.
Face: 1,000, Stated 11%
Proceeds: 1,020, Effective 10%
Bonds issued at a premium:
Face 11% 10% Amt. Carrying
1,000 1,020
110 102 8 1,012
Bonds issued at a premium:
DR Interest Expense 102
DR Premium Amortization 8
CR Interest Payable 110
Face: 1,000, Stated 10%
Proceeds: 980, Effective 11%
Bonds issued at a discount:
Face 10% 11% Amt. Carrying
1000 980
100 108 8 987.8
Bonds issued at a discount:
DR Interest Expense 108
CR Discount Amortization 8
CR Interest Payable 100
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astone
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| Posted: 26 Apr 2012 at 20:57 | IP Logged
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Year end bond interest accrual:
DR Interest Expense
(Carrying $ * Effective %) /12 = (per month $) x (# of months between last payment and year end)
CR Accrued Interest Payable
(Face $ * Coupon %) /12 = (per month $) x (# of months between last payment and year end)
DR/CR Amortization - Plug
Reverse this entry next year and book when interest is actually paid
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berry0331
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Joined: 04 Sep 2011
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Posts: 49
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| Posted: 27 Apr 2012 at 00:06 | IP Logged
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Thank you so much!! I got it!:)
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