Bond
$80,000,000
20
5%
Bond
$75,000,000
10
6%
interest
$2,000,000
$46,229,540
PVA,i=3%,n=40
interest
$1,500,000
$23,383,740
Principal
$24,524,800
PV,i=3%,n=40
Principal
$45,770,250
$70,754,340
$69,153,990
4%
5%
PVA,i=2.5%,n=20
PV,i=2.5%,n=20
rrr
-~y;r--
rT
-;--
Bond
$70,000,000
15
9%
Bond
$70,000,000
15
10%
$64,619,818
10%
$64,912,925
11%
Interest expense
$3,230,991
Interest expense
$3,570,211
Bond
$80,000,000
10
3%
Bond
$60,000,000
$73,459,316
4%
$49,624,854
effective interest
cash interest
Increase
Outstanding
effective interest
1-Jan
$73,459,316
1-Jan
1-Jul
$1,469,186
$1,200,000
$269,186
$73,728,502
1-Jul
$1,984,994
31-Dec
$1,474,570
$1,200,000
$274,570
$74,003,072
31-Dec
$1,992,394
total
$2,943,756
total
$3,977,388
15
6%
8%
cash interest
Increase
Outstanding
$49,624,854
$1,800,000
$184,994
$49,809,848
$1,800,000
$192,394
$50,002,242
Bond
$660,000
4
4%
5%
Determine price at purchase
interest
$13,200
$94,646
PVA,i=2.5%,8
principal
$660,000
$541,695
PV,i=2.5%,8
1
$636,341
Dec 31,2024 book value
641,826
$
5
interest expense for 2024
31,885
$
6
Bond
$800,000
4
10%
11%
Determine price at purchase
interest
$40,000
$253,383
PVA,i=5.5%,8
principal
$800,000
$521,280
PV,i=5.5%,8
1
$774,663
Dec 31,2024 book value
780,019
$
5
interest expense for 2024
85,356
$
6
2. Journal entry at issuance
2
Cash
636,341
$
Discount on bond payable
23,659
$
Bond payable
4. Interest expense 6/30/24
4
Interest expense
15,909
$
Discount on bond payable
Cash
7. Interest expense 12/31/27
Interest expense
16,417
$
Discount on bond payable
Cash
Retirement of bond 12/31/27
Bond payable
660,000
$
Cash
2. Journal entry at issuance
2
Cash
774,663
$
Discount on bond payable
25,337
$
Bond payable
4. Interest expense 6/30/24
4
Interest expense
42,606
$
Discount on bond payable
Cash
7. Interest expense 12/31/27
Interest expense
43,790
$
Discount on bond payable
Cash
Retirement of bond 12/31/27
Bond payable
800,000
$
Cash
3
Date
Cash payment
effective interest
increase
Outstanding
1/1/2024
636,341
$
6/30/2024
13,200
$
15,909
$
2,709
$
639,050
$
660,000
$
12/31/2024
13,200
$
15,976
$
2,776
$
641,826
$
6/30/2025
13,200
$
16,046
$
2,846
$
644,671
$
12/31/2025
13,200
$
16,117
$
2,917
$
647,588
$
6/30/2026
13,200
$
16,190
$
2,990
$
650,578
$
2,709
$
12/31/2026
13,200
$
16,264
$
3,064
$
653,642
$
13,200
$
6/30/2027
13,200
$
16,341
$
3,141
$
656,783
$
12/31/2027
13,200
$
16,417
$
3,217
$
660,000
$
3,217
$
13,200
$
660,000
$
3
Date
Cash payment
effective interest
increase
Outstanding
1/1/2024
774,663
$
6/30/2024
40,000
$
42,606
$
2,606
$
777,269
$
800,000
$
12/31/2024
40,000
$
42,750
$
2,750
$
780,019
$
6/30/2025
40,000
$
42,901
$
2,901
$
782,920
$
12/31/2025
40,000
$
43,061
$
3,061
$
785,981
$
6/30/2026
40,000
$
43,229
$
3,229
$
789,210
$
2,606
$
12/31/2026
40,000
$
43,407
$
3,407
$
792,616
$
40,000
$
6/30/2027
40,000
$
43,594
$
3,594
$
796,210
$
12/31/2027
40,000
$
43,790
$
3,790
$
800,000
$
3,790
$
40,000
$
800,000
$
Convertible bonds at 101 at 1/1/24
$23,000,000
20
8%
1. Record at issuance
Interest paid semiannually
each $1,000 bonds convert to 40 shares
currently selling at 99
Century Services purchased 10%
2. Interest payment 6/30/28
3. Conversion of bonds 7/1/29
Convertible bonds at 101 at 1/1/24
$13,000,000
10
10%
1. Record at issuance
Interest paid semiannually
each $1,000 bonds convert to 40 shares
currently selling at 99
Century Services purchased
15%
2. Interest payment 6/30/28
3. Conversion of bonds 7/1/29
Cash
$23,230,000
Convertible bonds payable
$23,000,000
Premium on bonds payable
$230,000
Investment in convertible bonds
$2,300,000
Premium on investment in bonds
$23,000
Cash
$2,323,000
Interest expense
914,250
$
Premium on bonds payable
5,750
$
Cash
920,000
$
Cash
92,000
$
Premium on investment in bonds
$575
Interest revenue
91,425
$
Convertible bonds payable
$2,300,000
Premium on bonds payable
16,675
$
Common stock
$2,316,675
Investment in common stock
2,316,675
$
Investment in convertible bonds
$2,300,000
Premium on investment in bonds
16,675
$
Cash
$13,130,000
Convertible bonds payable
$13,000,000
Premium on bonds payable
$130,000
Investment in convertible bonds
$1,950,000
Premium on investment in bonds
$19,500
Cash
$1,969,500
Interest expense
643,500
$
Premium on bonds payable
6,500
$
Cash
650,000
$
Cash
97,500
$
Premium on investment in bonds
$975
Interest revenue
96,525
$
Convertible bonds payable
$1,950,000
Premium on bonds payable
8,775
$
Common stock
$1,958,775
Investment in common stock
1,958,775
$
Investment in convertible bonds
$1,950,000
Premium on investment in bonds
8,775
$
23,000,000
$
230,000
$
$5,750 11 times
166,750
$
$2,300,000
23,000
$
$575 11 times
16,675
$
13,000,000
$
130,000
$
$6,500 11 times
58,500
$
$1,950,000
19,500
$
$975 11 times
8,775
$
Investment in convertible bonds
Premium on bonds payable
Convertible bonds payable
Premium on investment in bonds
Century Services
Convertible bonds payable Premium on bonds payable
Century Services
Investment in convertible bonds Premium on investment in bonds
Federal Semiconductors
$850,000,000
8%
1/1/2024
Payments
Bonds sold
$771,793,266
12/31/2043
1/1/2024
Market yield
9%
6/30/2024
Interest semiannual
12/31/2024
interest at effective rate
6/30/2025
option to report bonds at FV
12/31/2025
12-31-2024 FV of bonds
$760,000,000
12-31-2025 FV of bonds
$766,000,000
1/1/2024
6/30/2024
12/31/2024
Balance
6/30/2025
12/31/2025
Balance
Federal Semiconductors
$750,000,000
8%
1/1/2024
Payments
Bonds sold
$680,994,058
12/31/2043
1/1/2024
Market yield
9%
6/30/2024
Interest semiannual
12/31/2024
interest at effective rate
6/30/2025
option to report bonds at FV
12/31/2025
12-31-2024 FV of bonds
$670,000,000
12-31-2025 FV of bonds
$676,000,000
1/1/2024
6/30/2024
12/31/2024
Balance
6/30/2025
12/31/2025
Balance
Cash interest
Bond interest
Increase
Carrying value
Fair Value
Fair value adj
Increase
$771,793,266
$34,000,000
$34,730,697
$730,697
$772,523,963
$34,000,000
$34,763,578
$763,578
$773,287,541
$760,000,000
$13,287,541
$13,287,541
$34,000,000
$34,797,939
$797,939
$774,085,481
$34,000,000
$34,833,847
$833,847
$774,919,327
$766,000,000
$8,919,327
($4,368,214)
Net Liability(FMV)
$771,793,266
$730,697
$763,578
$13,287,541
$773,287,541
13,287,541
$
$760,000,000
$797,939
$833,847
$4,368,214
$774,919,327
8,919,327
$
$766,000,000
Cash interest
Bond interest
Increase
Carrying value
Fair Value
Fair value adj
Increase
$680,994,058
$30,000,000
$30,644,733
$644,733
$681,638,791
$30,000,000
$30,673,746
$673,746
$682,312,536
$670,000,000
$12,312,536
$12,312,536
$30,000,000
$30,704,064
$704,064
$683,016,600
$30,000,000
$30,735,747
$735,747
$683,752,347
$676,000,000
$7,752,347
($4,560,189)
Net Liability(FMV)
$680,994,058
$644,733
$673,746
$12,312,536
$682,312,536
12,312,536
$
$670,000,000
$704,064
$735,747
$4,560,189
Bonds Payable Fair Value Adjustment
Bonds Payable Fair Value Adjustment
$683,752,347
7,752,347
$
$676,000,000
Issuance of bond
Cash
Discount on bonds payable
Record interest expense
6/30/2024
Interest expense
12/31/2024
Interest expense
Record fair value adj
12/31/2024
Fair value adjustment
Record interest expense
6/30/2025
Interest expense
12/31/2025
Interest expense
Record fair value adj
12/31/2025
Loss on bonds payable (unrealized, NI)
Loss on bonds payable (unrealized, OCI)
Issuance of bond
Cash
Discount on bonds payable
Record interest expense
6/30/2024
Interest expense
12/31/2024
Interest expense
Record fair value adj
12/31/2024
Fair value adjustment
Record interest expense
6/30/2025
Interest expense
12/31/2025
Interest expense
Record fair value adj
12/31/2025
Loss on bonds payable (unrealized, NI)
Loss on bonds payable (unrealized, OCI)
$771,793,266
$78,206,734
Bonds Payable
$850,000,000
$34,730,697
Discount on bonds payable
$730,697
Cash
$34,000,000
$34,763,578
Discount on bonds payable
$763,578
Cash
$34,000,000
$13,287,541
Gain on bonds payable
$13,287,541
$34,797,939
Discount on bonds payable
$797,939
Cash
$34,000,000
$34,833,847
Discount on bonds payable
$833,847
Cash
$34,000,000
$2,184,107
$2,184,107
Fair Value Adjustment
$4,368,214
$680,994,058
$69,005,942
Bonds Payable
$750,000,000
$30,644,733
Discount on bonds payable
$644,733
Cash
$30,000,000
$30,673,746
Discount on bonds payable
$673,746
Cash
$30,000,000
$12,312,536
Gain on bonds payable
$12,312,536
$30,704,064
Discount on bonds payable
$704,064
Cash
$30,000,000
$30,735,747
Discount on bonds payable
$735,747
Cash
$30,000,000
$2,280,094
$2,280,094
Fair Value Adjustment
$4,560,189
Payment
Cash Payment
Effective interest
Increase
Outstanding
$5,802,315
1
$332,000
$348,139
$16,139
$5,818,454
2
$332,000
$349,107
$17,107
$5,835,561
3
$332,000
$350,134
$18,134
$5,853,695
4
$332,000
$351,222
$19,222
$5,872,917
5
$332,000
$352,375
$20,375
$5,893,292
6
$332,000
$353,598
$21,598
$5,914,890
38
$332,000
$471,377
$139,377
$7,995,654
39
$332,000
$479,739
$147,739
$8,143,393
40
$332,000
$488,607
$156,607
$8,300,000
Payment
Cash Payment
Effective interest
Increase
Outstanding
$5,774,920
1
$216,000
$230,997
$14,997
$5,789,917
2
$216,000
$231,597
$15,597
$5,805,514
3
$216,000
$232,221
$16,221
$5,821,735
4
$216,000
$232,869
$16,869
$5,838,604
5
$216,000
$233,544
$17,544
$5,856,148
6
$216,000
$234,246
$18,246
$5,874,394
38
$216,000
$280,008
$64,008
$7,064,202
39
$216,000
$282,568
$66,568
$7,130,770
40
$216,000
$285,230
$69,230
$7,200,000
Face amount of bond
$8,300,000
Initial selling price
$5,802,315
Term to maturity
20
Interest
Effective interest rate
Stated annual rate
8%
Effective annual rate
12%
Total cash interest paid
$13,280,000
Effective interest expense
$15,777,685
Face amount of bond
$7,200,000
Initial selling price
$5,774,920
Term to maturity
20
Interest
Effective interest rate
Stated annual rate
6%
Effective annual rate
8%
Total cash interest paid
$8,640,000
Effective interest expense
$10,065,080
Mcwherter Instruments
$400,000,000
20
10%
1. Bond Price
$339,814,000
Market yield
12%
Interest
Interest semiannual
Principal
Blanton Technologies
$400,000
0.10%
2. Record issue
McWherter
1/1/2024
Blanton
1/1/2024
3. Record interest expense
McWherter
6/30/2024
Blanton
6/30/2024
4. Record interest expense
McWherter
12/31/2024
Blanton
12/31/2024
Mcwherter Instruments
$300,000,000
20
8%
1. Bond Price
$248,524,080
Market yield
10%
Interest
Interest semiannual
Principal
Blanton Technologies
$300,000
0.10%
2. Record issue
McWherter
1/1/2024
Blanton
1/1/2024
3. Record interest expense
McWherter
6/30/2024
Blanton
6/30/2024
4. Record interest expense
McWherter
12/31/2024
Blanton
12/31/2024
$20,000,000
$300,926,000
PVA,i=6%,n=40
$400,000,000
$38,888,000
PV,I=6%,n=40
Cash
$339,814,000
Discounts on bonds payable
$60,186,000
Bonds payable
$400,000,000
Investment in bonds
$400,000
Discount on investment in bonds
$60,186
Cash
$339,814
Interest expense
$20,388,840
Discount on bonds payable
$388,840
Cash
$20,000,000
Cash
$20,000
Discount on investment in bonds
$389
Interest revenue
$20,389
Interest expense
$20,412,170
Discount on bonds payable
$412,170
Cash
$20,000,000
Cash
$20,000
Discount on investment in bonds
$412
Interest revenue
$20,412
$12,000,000
$205,909,080
PVA,i=5%,n=40
$300,000,000
$42,615,000
PV,I=5%,n=40
Cash
$248,524,080
Discounts on bonds payable
$51,475,920
Bonds payable
$300,000,000
Investment in bonds
$300,000
Discount on investment in bonds
$51,476
Cash
$248,524
Interest expense
$12,426,204
Discount on bonds payable
$426,204
Cash
$12,000,000
Cash
$12,000
Discount on investment in bonds
$426
Interest revenue
$12,426
Interest expense
$12,447,514
Discount on bonds payable
$447,514
Cash
$12,000,000
Cash
$12,000
Discount on investment in bonds
$448
Interest revenue
$12,448
VHF Industries acquired machine
FV
$7,985,420
5
noninterest note
$10,000,000
5 installments
$2,000,000
VHF Industries acquired machine
FV
$5,070,150
2
noninterest note
$6,000,000
2 installments
$3,000,000
1. Effective rate of interest implicit
8%
3.99271
PV,i=?,n=5
2. Purchase of machine
1/1/2024
Equipment
$7,985,420
Notes payable
$7,985,420
3. First installment payment
12/31/2024
Interest expense
$638,834
Notes payable
$1,361,166
Cash
$2,000,000
4. Second installment payment
12/31/2025
Interest expense
$529,940
Notes payable
$1,470,060
Cash
$2,000,000
5. Market rate 12%
Installment x PVA
$7,209,560
PVA,i=12%,n=5
1/1/2024
Equipment
$7,209,560
Notes payable
$7,209,560
1. Effective rate of interest implicit
12%
1.69005
PV,i=?,n=2
2. Purchase of machine
1/1/2024
Equipment
$5,070,150
Notes payable
$5,070,150
3. First installment payment
12/31/2024
Interest expense
$608,418
Notes payable
$2,391,582
Cash
$3,000,000
4. Second installment payment
12/31/2025
Interest expense
$321,428
Notes payable
$2,678,572
Cash
$3,000,000
5. Market rate 11%
Installment x PVA
$5,137,560
PVA,i=11%,n=2
1/1/2024
Equipment
$5,137,560
Notes payable
$5,137,560
