Intermediate Accounting 18th Edition Kieso Ch 15 to 23

CHAPTER 15
SOLUTIONS TO B EXERCISES

E 15.1B (15–20 minutes)

1. Cash ($50,000,000 X 1.02) ............................. 51,000,000
Bonds Payable........................................ 50,000,000
Premium on Bonds Payable .................. 1,000,000
($51,000,000 - $50,000,000) .................

2. Cash ............................................................... 35,350,000a
Bonds Payable........................................ 35,000,000e
Premium on Bonds Payable
($35,122,500d - $35,000,000e) ................. 122,500
Paid-in Capital—Stock Warrants ........... 227,500b
Value of bonds
plus warrants
($35,000,000 X 1.01) $35,350,000a
Value of warrants
(35,000c X $6.50) 227,500b
Value of bonds $35,122,500d
c
($35,000,000 ÷ $1,000)

3. Debt Conversion Expense ............................ 355,000
Bonds Payable .............................................. 60,000,000
Premium on Bonds Payable ......................... 155,000
Common Stock (600,000 X $1)............... 600,000
Paid-in Capital in Excess of Par –
Common Stock ................................. 59,555,000*
Cash ........................................................ 355,000

*[($60,000,000 + $155,000) – $600,000]




Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Exercise B Solutions (For Instructor Use Only) 15-1

,E 15.2B (15–20 minutes)

(a) Interest Payable ($900,000b X 4/6)......................... 600,000
Interest Expense [($900,000b X 2/6) + $1,890c] ........ 301,890
Discount on Bonds Payable ........................... 1,890c
Interest Payable ($15,000,000a X 12% X ½).... 900,000b
Calculations:
Par value $15,000,000a
Issuance price ($15,000,000 X 97%) 14,550,000
Total discount $ 450,000d

Months remaining 476e (480 – 4)
Discount per month
($450,000d ÷ 476e) $ 945f
Discount amortized
(2 X $945f) $1,890c

(b) Bonds Payable ($15,000,000 X ½) ......................... 7,500,000i
Discount on Bonds Payable............................ 221,218h
Common Stock (60,000 X $1) .......................... 60,000
Paid-in Capital in Excess of Par – Common
Stock ......................................................... 7,218,782*

*[($7,500,000i – $221,218) – $60,000]

Calculations:

Discount related to 1/2 of
the bonds ($450,000d X 1/2) $225,000g
Less: Discount amortized
[($225,000g ÷ 476e) X 8] 3,782
Unamortized bond discount $221,218h

E 15.3B (10–20 minutes)

Conversion recorded at book value of the bonds:

Bonds Payable ............................................................... 5,600,000*
Premium on Bonds Payable ......................................... 150,000
Common Stock (5,600** X 10 X $1) ....................... 56,000
Paid-in Capital in Excess of Par – Common Stock
($5,600,000 + $150,000 - $56,000) ................................. 5,694,000
**($5,600,000* ÷ $1,000)

15-2 Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Exercise B Solutions (For Instructor Use Only)

,E 15.4B (15–20 minutes)

(a) Cash ....................................................................... 26,500,000
Bonds Payable ................................................... 25,000,000
Premium on Bonds Payable ............................. 1,500,000a
($26,500,000 - $25,000,000)

(b) Bonds Payable ................................................ 10,000,000
Premium on Bonds Payable
(Schedule 1) ................................................. 510,000b
Common Stock, $0.50 par
(Schedule 2) ......................................... 100,000e
Paid-in Capital in Excess of Par – ......... 10,410,000
Common Stock ($10,000,000 + $510,000 - $100,000)

Schedule 1
Computation of Unamortized Premium on Bonds Converted

Premium on bonds payable on July 1, 2024 .............. $1,500,000a
Amortization for 2024 ($1,500,000a ÷ 10 X 6/12) .......... $ 75,000
Amortization for 2025 ($1,500,000a ÷ 10) ..................... 150,000 225,000
Premium on bonds payable on January 1, 2026......... 1,275,000
c
Bonds converted (10,000/25,000 ) ............................... 40%d
Unamortized premium on bonds converted ............... $ 510,000b
Schedule 2
Computation of Common Stock Resulting from Conversion

Number of shares convertible on July 1, 2024
Number of bonds ($25,000,000c ÷ $1,000) ................ 25,000
Number of shares for each bond .............................. X 10 250,000
Stock split on January 1, 2025 ...................................... X 2
Number of shares convertible after the stock split ..... 500,000
% of bonds converted ................................................... X 40%d
Number of shares issued .............................................. 200,000
Par value/per share ........................................................ $0.50
Total par value ............................................................... $100,000e




Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Exercise B Solutions (For Instructor Use Only) 15-3

, E 15.5B (10–20 minutes)

Interest Expense ($125,000 - $3,395)............................ 121,605
Premium on Bonds Payable
[$110,050 ÷ 162 = $679a; $679a X 5] ................... 3,395b
Cash (12% X $2,500,000 X 5/12) ............................ 125,000

Bonds Payable ............................................................... 2,500,000
Premium on Bonds Payable ($110,050 – $3,395b)............. 106,655d
Gain on Retirement of Debt ................................... 53,327**
Cash ($2,500,000 X ½) ........................................... 1,250,000c
Common Stock (1,250 X 15 X $10) ........................ 187,500e
Paid-in Capital in Excess of Par – Common Stock 1,115,828*

*[$1,250,000c + ($106,655d X 1/2) – $187,500e]
**[$1,250,000c + ($106,655d X 1/2) – $1,250,000c]

E 15.6B (25–35 minutes)

(a) December 31, 2026
Bond Interest Expense ($60,000 - $3,333) .............. 56,667
Premium on Bonds Payable
($100,000b X 1/15 X 6/12)..................................... 3,333
Cash ($1,000,000a X 12% X 6/12) ..................... 60,000

(b) January 1, 2027
Bonds Payable ......................................................... 400,000e
Premium on Bonds Payable .................................... 34,667d
Common Stock (400 X 4 X $5) ......................... 8,000f
Paid-in Capital in Excess of Par – Common
Stock ($400,000e + $34,667d - $8,000f) ......... 426,667

Total premium
($1,000,000a X 10%) $100,000b
Premium amortized
($100,000b X 2/15) 13,333j
Balance $ 86,667c

Bonds converted
($400,000e ÷ $1,000,000a) 40%
Related premium
($86,667c X 40%) 34,667d

15-4 Copyright © 2022 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 18/e, Exercise B Solutions (For Instructor Use Only)