Exercise 10.6, page 468
Glen Pool Club, Inc: Amortization table
Monthly Interest Period |
Monthly Payment |
Interest Expense (1% of the Last Unpaid balance) |
Reduction in Unpaid Balance (A) – (B) |
Unpaid Balance |
|
Original balance |
— |
— |
— |
$1,500,000 |
|
1 |
$15,430 |
$15,000 |
$430 |
1,499,570 |
|
2 |
15,430 |
14,996 |
434 |
1,499,136 |
b. Journal entry to record the second monthly payment
| Particular |
Debit |
Credit |
| Interest Expense |
14,996 |
|
| Mortgage Payable |
434 |
|
| Cash |
15,430 |
|
| To record second monthly installment on mortgage payable. | ||
Delegate your assignment to our experts and they will do the rest.
c. The monthly interest will decrease. Interest expense is usually based on the unpaid principal balance at the end of every month. Since the unpaid principal balance will decrease in each period, the interest expense will decrease.
Exercise 10.10, page 469
Mellilo Corporation
To record issuance of bonds
|
Date |
Particular |
Debit |
Credit |
|
01-Jul |
Cash |
4,900,000 |
|
| Discount on Bonds Payable |
100,000 |
||
|
Bonds Payable |
5,000,000 |
||
| To record issuance of bonds at 98. Interest rate |
To pay interest and amortize the bond discount
|
Date |
Particular |
Debit |
Credit |
|
|
2007 |
||||
|
31 Dec. |
Bond Interest Expense |
240,000 |
||
|
Discount on Bonds Payable |
2,500 |
|||
|
Cash |
237,500 |
|||
| To pay interest and amortize bond discount: | ||||
| Semiannual interest payment: | ||||
| $5,000,000 x 9 1/2% x 1/2 |
$237,500 |
|||
|
Add discount amortized: |
||||
| [$100,000 ¸ 20 yrs.] x 1/2 |
2,500 |
|||
|
Interest expense |
$240,000 |
|||
June 30, 2027
|
2027 |
Particular |
Debit |
Credit |
|
30-Jun |
Bond Interest Expense |
240,000 |
|
|
Discount on Bonds Payable |
2,500 |
||
|
Cash |
237,500 |
||
| To make final interest payment and amortize bond discount (same calculation as in part b. above). | |||
|
30-Jun |
Bond Payable |
5,000,000 |
|
| Cash |
5,000,000 |
||
| To retire bonds at maturity. |
(1) Amortization of bond discount will increase annual interest expense and thus reduce annual profit. (2) Amortization of bond discount is a noncash component of annual interest expense and has no effect upon annual net cash from operating activities (Brooks & Mukherjee, 2013).
Problem 10.3A, page 472
Swanson Corporation
|
General Journal |
||||
| Date | Particulars | Debit | Credit | |
|
6 |
Aug |
Cash | 12,000 | |
| Notes Payable | 12,000 | |||
| Borrowed $12,000 @ 12% per annum from Maple Bank. Issued a 45-day promissory note. | ||||
|
16 |
Sept |
Office Equipment | 18,000 | |
| Notes Payable | 18,000 | |||
| Issued 3-month, 10% note to Seawald Equipment as payment for office equipment. | ||||
| . | ||||
|
20 |
Sept |
Notes Payable | 12,000 | |
| Interest Expense | 180 | |||
| Cash | 12,180 | |||
| Paid note and interest to Maple Bank ($12,000 x 12% x 45/360 = $180). | ||||
|
1 |
Nov |
Cash | 250,000 | |
| Notes Payable | 250,000 | |||
| Obtained 90-day loan from Mike Swanson; interest @ 15% per annum. | ||||
|
1 |
Dec |
Inventory | 5,000 | |
| Notes Payable | 5,000 | |||
| To record purchase of inventory and issue 90-day, 14% note payable to Gathman Corporation. | ||||
|
16 |
Dec |
Notes Payable | 18,000 | |
| Interest Expense | 450 | |||
| Cash | 450 | |||
| Notes Payable | 18,000 | |||
| Paid note and interest to Seawald Equipment which matured today and issued a 30-day, 16% renewal note. Interest: $18,000 x 10% x 3/12 = $450 | ||||
|
b. |
Adjusting Entry |
|||
|
31 |
Dec |
Interest Expense | 6,428 | |
| Interest Payable | 6,428 | |||
|
To record interest accrued on notes payable: Mike Swanson ($250,000 x 15% x 2/12 = $6,250); Gathman Corp. ($5,000 x 14% x 1/12 = $58); and Seawald Equip. ($18,000 x 16% x 1/12 x 1/2 =$120). |
||||
Part B
Apple Inc.
Preferred Stock
Apple Inc. does not report any preferred stock in its balance sheet.
Common Stock
Apple Inc. reported common stock of 12,600,00 shares authorized, 4,754,986 shares issued and 5,126,201 shares outstanding. The company’s par value of each stock is $0.00001 (“Apple Inc. Form 10-K Report”, 2018).
Treasury Stock
Apple Inc. did not report any treasury stock in its balance sheet.
References
Apple Inc. Form 10-K Report. (2018). Retrieved from https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf
Brooks, R., & Mukherjee, A. K. (2013). Financial management: core concepts . Pearson.
