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Problem 09.05-07

Part 1
Beckwith Boots invested $100,000 in 5-year bonds issued by Ace Brick Company. The bonds were purchased at par on January 1, 20X1, and bear interest at a rate of 8% per annum, payable semiannually.
(a) Prepare the journal entry to record the initial investment on January, 20X1.
(b) Prepare the journal entry that Beckwith would record on each interest date.
(c) Prepare the journal entry that Beckwith would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this investment, and how does the difference compare to total interest income that was recognized?
Part 2
Beckwith Boots invested $100,000 in 5-year bonds issued by Ace Brick Company. The bonds were purchased at 103, and bear interest at a stated rate of 8% per annum, payable semiannually.
(a) Prepare the journal entry to record the initial investment on January, 20X1.
(b) Prepare the journal entry that Beckwith would record on each interest date.
(c) Prepare the journal entry that Beckwith would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this investment, and how does the difference compare to total interest income that was recognized?
Part 3
Beckwith Boots invested $100,000 in 5-year bonds issued by Ace Brick Company. The bonds were purchased at 98, and bear interest at a stated rate of 8% per annum, payable semiannually.
(a) Prepare the journal entry to record the initial investment on January, 20X1.
(b) Prepare the journal entry that Beckwith would record on each interest date.
(c) Prepare the journal entry that Beckwith would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this investment, and how does the difference compare to total interest income that was recognized? (d)
&R&"Myriad Web Pro,Bold"&20B-09.05
B-09.05
B-09.05
B-09.05

Worksheet 09.05-07

Part 1 Part 2 Part 3
(a)(b)(c) (a)(b)(c) (a)(b)(c)
GENERAL JOURNAL  GENERAL JOURNAL  GENERAL JOURNAL 
Date Accounts Debit Credit Date Accounts Debit Credit Date Accounts Debit Credit
Issue Cash 100,000 Issue Issue
Bonds payable 100,000
Interest Interest Expense 4,000 Interest Interest
Cash 4,000
(100000 x 8% x 6/12)
Maturity Bonds Payable 100,000 Maturity Maturity
Cash 100,000
(d) the total cash outflow is $100,000. The total cash inflow is $140,000 (($4,000 X 10 periods) + $100,000) The $40,00 Diff is to the intrest income over time of ($4,000 X 10 periods). (d) (d)
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B-09.05
B-09.05
B-09.05

Problem B 13.06-08

Part 1
Ace Brick company issued $100,000 of 5-year bonds. The bonds were issued at par on January 1, 20X1, and bear interest at a rate of 8% per annum, payable semiannually.
(a) Prepare the journal entry to record the bond issue on January, 20X1.
(b) Prepare the journal entry that Ace would record on each interest date.
(c) Prepare the journal entry that Ace would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this bond issued, and how does the difference compare to total interest expense that was recognized?
Part 2
Ace Brick company issued $100,000 of 5-year bonds. The bonds were issed at 103, and bear interest at a stated rate of 8% per annum, payable semiannually. The premium is amortized by the straight-line method.
(a) Prepare the journal entry to record the initial issue on January, 20X1.
(b) Prepare the journal entry that Horton would record on each interest date.
(c) Prepare the journal entry that Horton would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized?
Part 2
Ace Brick company issued $100,000 of 5-year bonds. The bonds were issued at 98, and bear interest at a stated rate of 8% per annum, payable semiannually. The discount is amortized by the straight-line method.
(a) Prepare the journal entry to record the initial issue on January, 20X1.
(b) Prepare the journal entry that Horton would record on each interest date.
(c) Prepare the journal entry that Horton would record at maturity of the bonds.
(d) How much cash flowed "in" and "out" on this bond issue, and how does the difference compare to total interest expense that was recognized?
&R&"Myriad Web Pro,Bold"&20B-13.06
B-13.06
B-13.06
B-13.06

Worksheet B 13.06-08

Part 1 Part 2 Part 3
(a)(b)(c) (a)(b)(c) (a)(b)(c)
GENERAL JOURNAL   GENERAL JOURNAL   GENERAL JOURNAL  
Date Accounts Debit Credit Date Accounts Debit Credit Date Accounts Debit Credit
Issue Issue Issue
Interest Interest Interest
Maturity Maturity Maturity
(d) (d) (d)
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B-13.06
B-13.06
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Problem B 16-08

Gainesville Corporation's income statement revealed sales of $700,000; gross profit of $300,000; selling and administrative costs of $140,000; and income taxes of $45,000. The selling and administrative expenses included $10,000 for depreciation. The company's operating activities generated positive cash flow of $129,000. Use the "indirect" approach to demonstrate how this amount was calculated. The following additional information is available:
Beginning-of-Period Balance End-of-Period Balance
Account receivable $70,000 $82,000
Inventory 50,000 41,000
Accounts payable 37,000 44,000
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Worksheet B 16-08

Cash flows from operating activities:
Net income $ -
Add (deduct) noncash effects on operating income
$ -
-
-
- -
Net cash provided by operating activities $ 129,000
&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-16.08
B-16.08