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2.
Principal Payment Interest Reducti
on
Period Bal. 1/1 12/31 Exp. 8% of Prin.
1 $ 72,000 $16,246 $5,760 $10,486
2 61,514 16,246 4,921 11,325
3 50,189
10-2
10. The secured bond will usually have the lower interest
rate because the bondholder has less risk when the debt
is backed by some real asset. The unsecured bond is
issued based on the general credit of the company and is
not secured by any particular company asset.
15. Callable bonds allow the company to pay off the debt prior
to the maturity date at a specified amount called the call
price. The call price is usually higher than the face value of
the bond. This call premium provides some protection to
bondholders when the interest rate falls and the company
pays off the bond earlier than the maturity date.
10-3
flows statement will show $100,000 cash inflows from
financing activities.
18. When the effective interest rate is higher than the stated
interest rate the bond will sell at a discount. The amount
of the discount combined with the stated rate of interest
will equal the effective interest rate or market interest
rate.
21. The cash received for the bond will be $975 (1,000 x
.975).
22. The carrying value of a bond is the face value of the bond
less any unamortized discount or plus any unamortized
premium.
10-4
23. The carrying value of the bonds is $19,800 ($25,000 face
minus $5,200 discount).
24. When the effective interest rate is higher than the stated
interest rate, interest expense will be larger than the
amount of interest paid. Interest paid is equal to the
face value of the note times the stated interest rate.
Interest expense is the amount of the interest paid plus
the amortization of bond discount.
APPENDIX
10-6
33. The future value of $10,000 invested at 8% interest for 4
years is $13,605:
10-7
Straight-line amortization charges an equal amount of
premium/discount to interest expense each year over the
term of the bond.
10-8
SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 10
EXERCISE 10-1A
a. Year 1
b. Year 2
$90,000 x 9% = $8,100
Note: Under option two, less interest will be paid in year two
and in future years because the amount subject to interest is
less.
10-9
10-10
EXERCISE 10-2A
Wallace Company
Amortization Schedule
$80,000, 4-Yr. Term Note, 9% Interest Rate
Prin. Bal. Cash Pay. Applied Applied Prin. Bal.
Year on Jan 1 Dec. 31 to to End of
Interest Principal Period
2 $80,000 $24,693 $7,200 $17,493 $62,507
004
2 62,507 24,693 5,626 19,067 43,440
005
2 43,440 24,693 3,910 20,783 22,657
006
2 22,657 24,693 2,036* 22,657 -0-
007
10-11
EXERCISE 10-3A
The first four years are provided for the use of the instructor:
Yang Company
Amortization Schedule
$100,000, 10-Yr. Term Note, 8% Interest Rate
Prin. Bal. Cash Pay. Applied Applied Prin Bal.
Year on Jan 1 Dec. 31 to to end of
Interest Principal Period
2 $100,000 $14,903 $8,000 $6,903 $93,097
004
2 93,097 14,903 7,448 7,455 85,642
005
2 85,642 14,903 6,851 8,052 77,590
006
2 77,590 14,903 6,207 8,696 68,894
007
a.
1. $8,000
2. $6,903
b. $93,097
c.
1. $7,448
2. $7,455
10-12
EXERCISE 10-4A
a. $13,500 ÷ $150,000 = .09
b.
Effect of Transactions on Financial Statements
c. (1)
Revenue $100,00
0
Expenses
Operating $50,000
Expenses
Interest Expense 13,500
Total Expenses 63,500
Net Income $ 36,500
c. (2)
Cash Flows From Operating
Activities:
Inflow from Customers $100,000
Outflow for Expenses (63,500)
Net Cash Flow from Operating $ 36,500
Activities
c. (3)
Cash Flows From Financing
Activities:
10-13
Inflow from Issue of Note $150,000
Outflow to Repay Note (25,063)
Net Cash Flow from Financing $124,937
Activities
10-14
EXERCISE 10-5A
10-15
10-16
EXERCISE 10-6A
a. $50,000 x 9% = $4,500
10-17
EXERCISE 10-7A
10-18
EXERCISE 10-8A
a. Premium
b. Discount
c. Discount
d. Premium
e. Face
EXERCISE 10-9A
EXERCISE 10-10A
10-19
EXERCISE 10-11A
a.
Effect of Transactions on Financial Statements
10-20
EXERCISE 10-12A
a.
Effect of Transactions on Financial Statements
10-21
EXERCISE 10-13A
a.
Home Supplies, Inc.
General Journal
Date Account Titles Debit Credit
2003
July 1 Cash1 95,000
Discount on Bonds Payable 5,000
Bonds Payable 100,000
Dec. Interest Expense 3,250
31
Discount on Bonds 250
Payable2
Cash3 3,000
Dec. Retained Earnings 3,250
31
Interest Expense 3,250
2004
June Interest Expense 3,250
30
Discount on Bonds Payable 250
Cash 3,000
Dec. Interest Expense 3,250
31
Discount on Bonds Payable 250
Cash 3,000
Dec. Retained Earnings 6,500
31
Interest Expense 6,500
1
$100,000 x .95 = $95,000
2
$5,000 ÷ 10 = $500; $500 x 6/12 = $250
3
$100,000 x 6% x 6/12 = $3,000
10-22
EXERCISE 10-13A a.(cont.)
10-23
EXERCISE 10-13A (cont.)
b.
Home Supplies, Inc.
Balance Sheet
Liabilities 2003 2004
Bonds Payable $100,00 $100,000
0
Discount on Bonds (4,750) (4,250)
Payable
Net Carrying Value of 95,250 95,750
Bonds
Total Liabilities $95,250 $95,750
10-24
EXERCISE 10-14A
Hammond Corp.
General Journal
Date Account Titles Debit Credit
2003
Jan.1 Cash 200,000
Bonds Payable 200,000
Dec. Interest Expense* 16,000
31
Cash 16,000
2004
Dec. Interest Expense 16,000
31
Cash 16,000
10-25
EXERCISE 10-15A
Macy Co.
General Journal
Date Account Titles Debit Credit
2004
Jan. 1 Cash1 192,000
Discount on Bonds Payable 8,000
Bonds Payable 200,000
Dec. Interest Expense2 1,600
31
Discount on Bonds Payable 1,600
Dec. Interest Expense3 16,000
31
Cash 16,000
2005
Dec. Interest Expense 1,600
31
Discount on Bonds Payable 1,600
Dec. Interest Expense 16,000
31
Cash 16,000
1
$200,000 x .96 = $192,000 cash proceeds
2
$8,000 ÷ 5 = $1,600 discount amortization per year
3
$200,000 x 8% = $16,000 interest payment per year
10-26
EXERCISE 10-16A
Bay Company
General Journal
Date Account Titles Debit Credit
2004
Jan. 1 Cash1 204,000
Premium on Bonds Payable 4,000
Bonds Payable 200,000
Dec. Premium on Bonds Payable2 800
31
Interest Expense 800
Dec. Interest Expense3 16,000
31
Cash 16,000
2005
Dec. Premium on Bonds Payable 800
31
Interest Expense 800
Dec. Interest Expense 16,000
31
Cash 16,000
1
$200,000 x 1.02 = $204,000 cash proceeds
2
$4,000 ÷ 5 = $800 premium amortization per year
3
$200,000 x 8% = $16,000 interest payment per year
10-27
EXERCISE 10-17A
a.
Goode Company
General Journal
Date Account Titles Debit Credit
2001
Jan. 1 Cash 500,000
Bonds Payable 500,000
Jan. 1 Land 500,000
Cash 500,000
Dec. Cash 60,000
31
Lease Revenue 60,000
Dec. Interest Expense ($500,000 x 40,000
31 8%)
Cash 40,000
Dec. Lease Revenue 60,000
31
Interest Expense 40,000
Retained Earnings 20,000
2002
Dec. Cash 60,000
31
Lease Revenue 60,000
Dec. Interest Expense 40,000
31
Cash 40,000
Dec. Lease Revenue 60,000
31
Interest Expense 40,000
Retained Earnings 20,000
10-28
EXERCISE 10-17A a. (cont.)
Goode Company
Assets = Liabilities + Stockholders’
Equity
Cash Bonds Payable Retained Earnings
2001 2001 2001
1/1 500,000 1/1 500,000 1/1 500,000 cl 20,000
12/31 60,000 12/31 40,000 Bal. 500,000 Bal. 20,000
Bal. 20,000 2002
2002 cl 20,000
12/31 60,000 12/31 40,000 Bal. 40,000
Bal. 40,000
Lease Revenue
2001
Land cl 60,000 12/31 60,000
2001 Bal. -0-
1/1 500,000 2002
Bal. 500,000 cl 60,000 12/31 60,000
Bal. -0-
Interest Expense
2001
12/31 cl 40,000
40,000
Bal. -0-
2002
12/31 cl 40,000
40,000
Bal. -0-
10-29
EXERCISE 10-17A (cont.) b.
Goode Company Financial Statements
Income Statements 2001 2002
Lease Revenue $60,000 $60,000
Interest Expense (40,000) (40,000)
Net Income $20,000 $20,000
Balance Sheets
Assets
Cash $ 20,000 $ 40,000
Land 500,000 500,000
Total Assets $520,000 $540,000
Liabilities
Bonds Payable $500,000 $500,000
Stockholders’ Equity
Common Stock -0- -0-
Retained Earnings 20,000 40,000
Total Stockholders’ Equity 20,000 40,000
Total Liab. and Stockholders’ $520,000 $540,000
Equity
Statements of Cash Flows
Cash Flows From Operating
Activities:
Inflow from Revenue $ 60,000 $ 60,000
Outflow for Interest (40,000) (40,000)
Net Cash Flow from Operating 20,000 20,000
Act.
Cash Flows From Investing
Activities:
Outflow to Purchase Land (500,000) -0-
Cash Flows From Financing
Activities:
Inflow from Bond Issue 500,000 -0-
Net Change in Cash 20,000 20,000
10-30
Plus: Beginning Cash Balance -0- 20,000
Ending Cash Balance $ 20,000 $ 40,000
EXERCISE 10-18A
Boark Company
Date Account Titles Debit Credit
2004
Jan. 1 Cash 400,000
Bonds Payable 400,000
2007
Dec. Loss on Bond Redemption 8,000
31
Bonds Payable 400,000
Cash 408,000
10-31
EXERCISE 10-19A
a.
b.
Ames Co. Cox Co. Douglas
Co.
Before Tax Interest $16,000 $35,000 $48,000
Cost
x (1 − Tax Rate) 65% 80% 75%
After Tax Interest $10,400 $28,000 $36,000
Cost
1.
Ames Co. Cox Co. Douglas Co.
After Tax Interest Cost $ 10,400 $ 28,000 $ 36,000
÷ Bonds Payable $200,000 $500,000 $800,000
= After Tax Interest 5.2% 5.6% 4.5%
Rate
OR 2.
Interest Rate x (1 − Tax .08 x ( 1−. .07 x (1 − .06 x (1 −
Rate) 35) .2) .25)
= After Tax Interest = 5.2% = 5.6% = 4.5%
Rate
10-32
EXERCISE 10-20A
EXERCISE 10-21A
EXERCISE 10-22A
10-33
EXERCISE 10-23A
a.
Present Value of $50,000 x .5083491 = $
Principal 25,417
Present Value of $4,000 x 7.02358 = 28,094
Interest 22
Selling Price $53,511
1
Table II, 7%, 10 years
2
Table IV, 7%, 10 years
b.
Account Titles Debit Credit
Cash 53,511
Premium on Bonds Payable 3,511
Bonds Payable 50,000
10-34
EXERCISE 10-24A
10-35
SOLUTIONS TO PROBLEMS - SERIES A - CHAPTER 10
PROBLEM 10-25A
a.
Jones Company
Amortization Schedule
$80,000, 3-Yr. Term Note, 8% Interest Rate
Prin. Cash Pay. Applied Applied Prin. Bal.
Year Bal. on Dec. 31 to to End of
Jan 1 Interest Principa Period
l
2 $80,000 $31,043 $6,400 $24,643 $55,357
001
2 55,357 31,043 4,429 26,614 28,743
002
2 28,743 31,043 2,300* 28,743 -0-
003
10-36
PROBLEM 10-25A (cont.)
b. Provided for the use of the Instructor:
Interest Expense
2001
12/31 6,400 cl 6,400
Bal. -0-
2002
12/31 4,429 cl 4,429
Bal. -0-
2003
12/31 2,300 cl 2,300
Bal. -0-
10-37
PROBLEM 10-25A (cont.)
Jones Company
Financial Statements
Income Statements 2001 2002 2003
Rent Revenue $36,00 $36,00 $36,00
0 0 0
Interest Expense (6,400) (4,429) (2,300)
Net Income $29,60 $31,57 $33,70
0 1 0
Balance Sheets
Assets
Cash $ $ $14,87
4,957 9,914 1
Land 80,000 80,000 80,000
Total Assets $84,95 $89,91 $94,87
7 4 1
Liabilities
Notes Payable $55,35 $28,74 $
7 3 -0-
Stockholders’ Equity
Retained Earnings 29,600 61,171 94,871
Total Liab. and Stockholders’ $84,95 $89,91 $94,87
Equity 7 4 1
Statements of Cash Flows
Cash Flows From Operating
Act.:
Inflow from Rental $36,00 $36,00 $36,00
0 0 0
Outflow for Interest (6,400) (4,429) (2,300)
Net Cash Flow from 29,600 31,571 33,700
Operating Act.
Cash Flow From Investing
Act.:
Outflow to Purchase Land (80,000 -0- -0-
)
10-38
Cash Flow From Financing
Act.:
Inflow from Loan 80,000 -0- -0-
Outflow to Repay Loan (24,643 (26,614 (28,743
) ) )
Net Cash Flow from Financing 55,357 (26,614 (28,743
Act. ) )
Net Change in Cash 4,957 4,957 4,957
Plus: Beginning Cash Balance -0- 4,957 9,914
Ending Cash Balance $ $ $14,87
4,957 9,914 1
PROBLEM 10-25A (cont.)
10-39
PROBLEM 10-26A
a.
Powell Company
Income Statement
For the Year Ended December 31, 2003
Service Revenue $18,000
Expenses
Interest Expense (6,828)
Net Income $11,172
10-40
PROBLEM 10-26A a. (cont.)
Powell Company
Financial Statements
Balance Sheet
As of December 31, 2003
Assets
Cash $11,172
Total Assets $11,17
2
Liabilities $
-0-
Stockholders’ Equity
Common Stock $ -0-
Retained Earnings 11,172
Total Stockholders’ Equity 11,172
Total Liabilities and Stockholders’ $11,17
Equity 2
Statement of Cash Flows
For the Year Ended December 31, 2003
10-42
PROBLEM 10-26A (cont.)
10-43
PROBLEM 10-27A
Transactions:
1. Issued bonds at 105. Cash proceeds = $157,500; Premium =
$7,500.
2. Purchased land for $157,500.
3. Land rental, $17,500 per year, 2004, 2005, 2006.
4. Interest payments per year, $15,000, 2004, 2005, 2006.
5. Amortized premium per year, $500.
6. Sold the land for $160,000, 1/1/07.
7. Paid off bonds at 106, cash payment of $159,000.
10-44
PROBLEM 10-27A (cont.) T-Accounts Provided for Instructor’s
Use:
Cash Bonds Payable Retained Earnings
2004 2004 2004
1. 157,500 2.157,500 1. 150,000 cl 3,000
3. 17,500 4. 15,000 Bal. Bal. 3,000
150,000
Bal. 2,500 2007 2005
2005 7. cl. 3,000
150,000
3. 17,500 4. 15,000 Bal. -0- Bal. 6,000
Bal. 5,000 2006
2006 Premium on Bonds cl. 3,000
Pay.
3. 17,500 4. 15,000 2004 Bal. 9,000
Bal. 7,500 5. 500 1. 7,500 2007
2007 Bal. 7,000 cl 500
6. 160,000 7.159,000 2005 Bal. 8,500
Bal. 8,500 5. 500
Bal. 6,500 Rental Income
Land 2006 2004
2004 5. 500 cl 17,500 3. 17,500
2. 157,500 Bal. 6,000 2005
Bal.157,500 2007 cl 17,500 3. 17,500
2007 7. 6,000 2006
6.157,500 Bal. -0- 17,500 3. 17,500
Bal. -0- Bal. -0-
Interest Expense
2004
4. 15,000 5. 500
cl 14,500
2005
4. 15,000 5. 500
cl 14,500
2006
4. 15,000 5. 500
cl 14,500
Bal. -0-
Gain on Sale of Land
2007
cl 2,500 6. 2,500
Bal. -0-
Loss on Bond Redempt.
2007
7. 3,000 cl 3,000
10-45
Bal. -0-
10-46
PROBLEM 10-27A (cont.)
Maywood Company
Financial Statements
Income Statements 2004 2005 2006 2007
Rent Revenue $17,50 $17,50 $17,50 $ -0-
0 0 0
Interest Expense (14,50 (14,50 (14,50 -0-
0) 0) 0)
Operating Income 3,000 3,000 3,000 -0-
Non-Operating
Inc./Expense
Gain on Sale of Land -0- -0- -0- 2,500
Loss on Bond -0- -0- -0- (3,000)
Redemption
Net Income $ $ $ $ (500)
3,000 3,000 3,000
Statement of Changes in Stockholders’ Equity
Common Stock $ $ -0- $ $ -0-
-0- -0-
Beginning Retained -0- 3,000 6,000 $9,000
Earnings
Plus Net Income (Loss) 3,000 3,000 3,000 (500)
Ending Retained 3,000 6,000 9,000 8,500
Earnings
Total Stockholders’ $3,000 $6,000 $9,000 $8,500
Equity
10-47
PROBLEM 10-27A (cont.)
Assets
Cash $ 2,500 $ $ 7,500 $8,500
5,000
Land 157,500 157,500 157,500 -0-
Total Assets $160,000 $162,50 $165,000 $8,500
0
Liabilities
Bonds Payable $150,000 $150,00 $150,000 $ -0-
0
Premium on Bonds Pay. 7,000 6,500 6,000 -0-
Total Liabilities 157,000 156,500 156,000 -0-
Stockholders’ Equity
Retained Earnings 3,000 6,000 9,000 8,500
10-48
PROBLEM 10-28A
a. The market rate of interest was greater than the stated
rate of interest. Consequently, the bonds sold at a
discount. If the bonds had sold at face value, Adams would
have received $50,000.
b.
General Journal
Date Account Titles Debit Credit
2002
Mar. 1 Cash 48,000
Discount on Bonds Payable 2,000
Bonds Payable 50,000
Sept. Interest Expense ($50,000 x 9% 2,250
1 x ½)
Cash 2,250
Dec. Interest Expense ($50,000 x 9% x 1,500
31 4/12)
Interest Payable 1,500
Dec. Interest Expense ($2,000 ÷ 8 x 208
31 10/12)
Discount on Bonds Payable 208
Dec. Retained Earnings 3,958
31
Interest Expense 3,958
2003
Mar. 1 Interest Expense 750
Interest Payable 1,500
Cash 2,250
Sept. Interest Expense 2,250
1
Cash 2,250
Dec. Interest Expense 1,500
31
Interest Payable 1,500
10-49
Dec. Interest Expense 250
31
Discount on Bonds Payable 250
Dec. Retained Earnings 4,750
31
Interest Expense 4,750
PROBLEM 10-28A (cont.)
c.
2002 2003
Liabilities
Interest Payable $ 1,500 $ 1,500
Bonds Payable 50,000 50,000
Less: Discount on Bonds (1,792) (1,542)
Payable
Carrying Value of Bonds 48,208 48,458
Payable
Total Liabilities $49,708 $49,958
d 2002 2003
.
Interest Expense Reported on Income $3,95 $4,75
Statement 8 0
e 2002 2003
.
Interest Paid in Cash to Bondholders $2,25 $4,50
0 0
10-50
PROBLEM 10-29A
10-51
PROBLEM 10-30A
a.
Effect of Transactions on Financial Statements
Rev. Exp./
No Assets = Liab. +S. G − Loss = Net Cash Flows
. Equity ain Inc.
1 100,000 = 100,000 + NA NA − NA = NA 100,000 FA
2. (10,000) = NA + (10,000 NA − 10,00 = (10,00 (10,000)
) 0 0) OA
3. (101,50 = (100,000 + (1,500) NA − 1,500 = (1,500) (101,500)
0) ) FA
b.
Date Account Titles Debit Credit
1. Cash 100,000
Bonds Payable 100,000
2. Interest Expense1 10,000
Cash 10,000
3. Bonds Payable 100,000
Loss on Redemption of Bonds 1,500
Cash2 101,500
1
$100,000 x 10% = $10,000
2
$100,000 x 101.5% = $101,500
10-52
PROBLEM 10-31A
Rev. Exp./
No Assets = Liab. + S. /
. − Loss = Net Cash
Equity Gain Inc. Flows
a. + = + + NA NA − NA = NA + FA
b. − = NA + − NA − + = − − OA
c. − = − + − NA − + = − − FA/OA
d. + = + + NA NA − NA = NA + FA
e. − = NA + − NA − + = − − OA
f. + = + + NA NA − NA = NA + FA
g. − = + + − NA − + = − − OA
h. NA = + + − NA − + = − NA
i. + = + + NA NA − NA = NA + FA
j. − = NA + − NA − + = − − OA
k. NA = − + + NA − − = + NA
10-53
PROBLEM 10-32A (APPENDIX)
b.
Date Account Title Debit Credit
1/1/02 Cash 214,047
Premium on Bonds Payable 14,047
Bonds Payable 200,000
10-54
SOLUTIONS TO EXERCISES - SERIES B - CHAPTER 10
EXERCISE 10-1B
10-55
EXERCISE 10-2B
Baco Company
Amortization Schedule
$120,000, 5-Yr. Term Note, 8% Interest Rate
Prin. Bal. Cash Pay. Applied Applied Prin. Bal.
Year on Jan 1 Dec. 31 to to End of
Interest Principal Period
2 $120,000 $30,055 $9,600 $20,455 $99,545
006
2 99,545 30,055 7,964 22,091 77,454
007
2 77,454 30,055 6,196 23,859 53,595
008
2 53,595 30,055 4,288 25,767 27,828
009
2 27,828 30,055 2,227* 27,828 -0-
010
10-56
EXERCISE 10-3B
Amer Company
Amortization Schedule
$80,000, 5-Yr. Term Note, 10% Interest Rate
Prin. Bal. Cash Pay. Applied Applied Prin Bal.
Year on Jan 1 Dec. 31 to to end of
Interest Principal Period
2 $80,000 $21,104 $8,000 $13,104 $66,896
004
2 66,896 21,104 6,690 14,414 52,482
005
2 52,482 21,104 5,248 15,856 36,626
006
2 36,626 21,104 3,663 17,441 19,185
007
2 19,185 21,104 1,919* 19,185 -0-
008
*Adjusted due to rounding
a.
1. $8,000
2. $13,104
b. $66,896
c.
1. $6,690
2. $14,414
10-57
EXERCISE 10-4B
a.
Effect of Transactions on Financial Statements
b. (1)
Revenue $100,00
0
Expenses
Operating $50,000
Expenses
Interest Expense 20,000
Total Expenses 70,000
Net Income $ 30,000
b. (2)
Cash Flows From Operating
Activities:
Inflow from Customers $100,000
Outflow for Expenses (70,000)
Net Cash Flow from Operating $ 30,000
Activities
b. (3)
Cash Flows From Financing
Activities:
Inflow from Issue of Note $200,000
10-58
Outflow to Repay Note (12,549)
Net Cash Flow from Financing $187,451
Activities
10-59
EXERCISE 10-5B
10-60
EXERCISE 10-6B
The total amount of interest paid each year will be the same
regardless of whether it is paid annually or semiannually. If
the interest is paid annually, the company will make one
payment of $800 ($10,000 x 8%) on December 31. If the
interest is paid semiannually, the company will make two
payments of $400 each ($10,000 x 8% x 6/12). One payment
would be made on June 30; the other payment would be made
on December 31. However, due to the time value of money,
semiannual interest works to the advantage of the lender of
the money and to the disadvantage of the borrower.
10-61
EXERCISE 10-7B
10-62
EXERCISE 10-8B
a. Face
b. Premium
c. Discount
d. Premium
e. Discount
EXERCISE 10-9B
EXERCISE 10-10B
10-63
EXERCISE 10-11B
a.
Effect of Transactions on Financial Statements
10-64
EXERCISE 10-12B
a.
Effect of Transactions on Financial Statements
10-65
EXERCISE 10-13B
a.
Farm Supplies, Inc.
General Journal
Date Account Titles Debit Credit
2003
July 1 Cash1 208,000
Premium on Bonds Payable 8,000
Bonds Payable 200,000
Dec. Interest Expense 5,600
31
Premium on Bonds Payable2 400
Cash3 6,000
Dec. Retained Earnings 5,600
31
Interest Expense 5,600
2004
June Interest Expense 5,600
30
Premium on Bonds Payable 400
Cash 6,000
Dec. Interest Expense 5,600
31
Premium on Bonds Payable 400
Cash 6,000
Dec. Retained Earnings 11,200
31
Interest Expense 11,200
1
$200,000 x 1.04 = $208,000
2
$8,000 ÷ 10 = $800; $800 x 6/12 = $400
3
$200,000 x 6% x 6/12 = $6,000
10-66
EXERCISE 10-13B a.(cont.)
10-67
EXERCISE 10-13B (cont.)
b.
Farm Supplies, Inc.
Balance Sheet
Liabilities 2003 2004
Bonds Payable $200,00 $200,000
0
Premium on Bonds 7,600 6,800
Payable
Net Carrying Value of 207,600 206,800
Bonds
Total Liabilities $207,60 $206,800
0
10-68
EXERCISE 10-14B
Miller Corp.
General Journal
Date Account Titles Debit Credit
2001
Jan.1 Cash 100,000
Bonds Payable 100,000
Dec. Interest Expense* 9,000
31
Cash 9,000
2002
Dec. Interest Expense 9,000
31
Cash 9,000
10-69
EXERCISE 10-15B
Creason Co.
General Journal
Date Account Titles Debit Credit
2005
Jan. 1 Cash1 97,500
Discount on Bonds Payable 2,500
Bonds Payable 100,000
Dec. Interest Expense2 500
31
Discount on Bonds Payable 500
Dec. Interest Expense3 8,000
31
Cash 8,000
2006
Dec. Interest Expense 500
31
Discount on Bonds Payable 500
Dec. Interest Expense 8,000
31
Cash 8,000
1
$100,000 x .975 = $97,500 cash proceeds
2
$2,500 ÷ 5 = $500 discount amortization per year
3
$100,000 x 8% = $8,000 interest payment per year
10-70
EXERCISE 10-16B
Vickers Company
General Journal
Date Account Titles Debit Credit
2006
Jan. 1 Cash1 206,000
Premium on Bonds Payable 6,000
Bonds Payable 200,000
June Premium on Bonds Payable2 600
30
Interest Expense 600
June Interest Expense3 12,000
30
Cash 12,000
Dec. Premium on Bonds Payable 600
31
Interest Expense 600
Dec. Interest Expense 12,000
31
Cash 12,000
2007
June Premium on Bonds Payable 600
30
Interest Expense 600
June Interest Expense 12,000
30
Cash 12,000
Dec. Premium on Bonds Payable 600
31
Interest Expense 600
Dec. Interest Expense 12,000
31
Cash 12,000
10-71
1
$200,000 x 1.03 = $206,000 cash proceeds
2
$6,000 ÷ 5 = $1,200; $1,200 x 6/12 = $600 premium
amortization per year
3
$200,000 x 12% = $24,000; $24,000 x 6/12 = $12,000 interest
payment per year
10-72
EXERCISE 10-17B
a.
Upton Company
General Journal
Date Account Titles Debit Credit
2004
Jan. 1 Cash 1,000,000
Bonds Payable 1,000,000
Jan. 1 Land 1,000,000
Cash 1,000,000
Dec. Cash 140,000
31
Lease Revenue 140,000
Dec. Interest Expense ($1,000,000 x 100,000
31 10%)
Cash 100,000
Dec. Lease Revenue 140,000
31
Interest Expense 100,000
Retained Earnings 40,000
2005
Dec. Cash 140,000
31
Lease Revenue 140,000
Dec. Interest Expense 100,000
31
Cash 100,000
Dec. Lease Revenue 140,000
31
Interest Expense 100,000
Retained Earnings 40,000
10-73
EXERCISE 10-17B a. (cont.)
Upton Company
Assets = Liabilities + Stockholders’
Equity
Cash Bonds Payable Retained Earnings
2004 2004 2004
1/1 1/1 1,000,000 1/1 cl 40,000
1,000,000 1,000,000
12/31 12/31 100,000 Bal. Bal. 40,000
140,000 1,000,000
Bal. 40,000 2005
2005 cl 40,000
12/31 12/31 Bal. 80,000
140,000 100,000
Bal. 80,000
Lease Revenue
2004
Land cl 140,000 12/31
140,000
2004 Bal. -0-
1/1 2005
1,000,000
Bal. cl 140,000 12/31
1,000,000 140,000
Bal. -0-
Interest Expense
2004
12/31 cl 100,000
100,000
Bal. -0-
2005
12/31 cl 100,000
100,000
Bal. -0-
10-74
EXERCISE 10-17B (cont.) b.
Upton Company Financial Statements
Income Statements 2004 2005
Lease Revenue $140,000 $140,000
Interest Expense (100,000) (100,000)
Net Income $ 40,000 $ 40,000
Balance Sheets
Assets
Cash $ 40,000 $
80,000
Land 1,000,000 1,000,000
Total Assets $1,040,00 $1,080,00
0 0
Liabilities
Bonds Payable $1,000,00 $1,000,00
0 0
Stockholders’ Equity
Common Stock -0- -0-
Retained Earnings 40,000 80,000
Total Stockholders’ Equity 40,000 80,000
Total Liab. and Stockholders’ $1,040,00 $1,080,00
Equity 0 0
Statements of Cash Flows
Cash Flows From Operating
Activities:
Inflow from Revenue $ 140,000 $ 140,000
Outflow for Interest (100,000) (100,000)
Net Cash Flow from Operating 40,000 40,000
Act.
Cash Flows From Investing
Activities:
Outflow to Purchase Land (1,000,00 -0-
0)
Cash Flows From Financing
10-75
Activities:
Inflow from Bond Issue 1,000,000 -0-
Net Change in Cash 40,000 40,000
Plus: Beginning Cash Balance -0- 40,000
Ending Cash Balance $ 40,000 $ 80,000
EXERCISE 10-18B
Han Company
Date Account Titles Debit Credit
2005
Jan. 1 Cash 500,000
Bonds Payable 500,000
2009
Dec. Loss on Bond Redemption 20,000
31
Bonds Payable 500,000
Cash 520,000
10-76
EXERCISE 10-19B
a.
b.
Pace Co. Pile Co. Park Co.
Before Tax Interest $30,000 $54,000 $40,000
Cost
x (1 − Tax Rate) 60% 70% 65%
After Tax Interest $18,000 $37,800 $26,000
Cost
1.
Pace Co. Pile Co. Park Co.
After Tax Interest Cost $ 18,000 $ 37,800 $ 26,000
÷ Bonds Payable $300,000 $600,000 $500,000
= After Tax Interest 6.0% 6.3% 5.2%
Rate
OR 2.
Interest Rate x (1 − Tax .10 x ( 1−. .09 x (1 − .08 x (1 −
Rate) 4) .3) .35)
= After Tax Interest = 6.0% = 6.3% = 5.2%
Rate
10-77
EXERCISE 10-20B
EXERCISE 10-21B
EXERCISE 10-22B
10-78
EXERCISE 10-23B
a.
Present Value of $100,00 x .4224111 = $
Principal 0 42,241
Present Value of $10,000 x 6.41765 = 64,177
Interest 82
Selling Price $106,41
8
1
Table II, 9%, 10 years
2
Table IV, 9%, 10 years
b.
Account Titles Debit Credit
Cash 106,41
8
Premium on Bonds Payable 6,418
Bonds Payable 100,000
10-79
10-80
EXERCISE 10-24B
10-81
SOLUTIONS TO PROBLEMS - SERIES B CHAPTER 10
PROBLEM 10-25B
a.
Mixon Company
Amortization Schedule
$100,000, 4-Yr. Term Note, 10% Interest Rate
Prin. Cash Pay. Applied Applied Prin. Bal.
Year Bal. on Dec. 31 to to End of
Jan 1 Interest Principa Period
l
2 $100,00 $31,547 $10,000 $21,547 $78,453
001 0
2 78,453 31,547 7,845 23,702 54,751
002
2 54,751 31,547 5,475 26,072 28,679
003
2 28,679 31,547 2,868 28,679 -0-
004
10-82
PROBLEM 10-25B (cont.)
b. Provided for the use of the Instructor:
Cash Notes Payable Retained Earnings
2001 2001 2001
1/1 100,000 1/1 100,000 1/1 100,000 cl 30,000
12/3140,000 12/31 31,547 12/3121,547 Bal. 30,000
Bal. 8,453 Bal. 78,453 2002
2002 2002 cl 32,155
12/3140,000 12/31 31,547 12/3123,702 Bal. 62,155
Bal. 16,906 Bal. 54,751 2003
2003 2003 cl 34,525
12/3140,000 12/31 31,547 12/3126,072 Bal. 96,680
Bal. 25,359 Bal. 28,679 2004
2004 2004 cl 37,132
12/3140,000 12/31 31,547 12/3128,679 Bal.133,812
Bal. 33,812 Bal. -0-
Rent Revenue
Land 2001
2001 cl 40,000 12/3140,000
1/1100,000 Bal. -0-
Bal.100,000 2002
cl 40,000 12/3140,000
Bal. -0-
2003
cl 40,000 12/3140,000
Bal. -0-
2004
cl 40,000 12/3140,000
Bal. -0-
Interest Expense
2001
12/3110,000 cl 10,000
Bal. -0-
2002
12/31 7,845 cl 7,845
Bal. -0-
2003
12/31 5,475 cl 5,475
Bal. -0-
2004
12/31 2,868 cl 2,868
Bal. -0-
10-83
PROBLEM 10-25B b. (cont.)
Mixon Company Financial Statements
Income Statements 2001 2002 2003 2004
Rent Revenue $40,000 $40,000 $40,000 $40,000
Interest Expense (10,000) (7,845) (5,475) (2,868)
Net Income $30,000 $32,155 $34,525 $37,132
Balance Sheets
Assets
Cash $ $ $ $ 33,812
8,453 16,906 25,359
Land 100,000 100,000 100,000 100,000
Total Assets $108,45 $116,90 $125,35 $133,81
3 6 9 2
Liabilities
Notes Payable $ $ $ $ -0-
78,453 54,751 28,679
Stockholders’ Equity
Retained Earnings 30,000 62,155 96,680 133,812
Total Liab. and Stk. $108,45 $116,90 $125,35 $133,81
Equity 3 6 9 2
Statements of Cash Flows
Cash Flows From Oper.
Act.:
Inflow from Rental $40,000 $40,000 $40,000 $40,000
Outflow for Interest (10,000) (7,845) (5,475) (2,868)
Net Cash Flow fm. Op. 30,000 32,155 34,525 37,132
Act.:
Cash Flows From Inv.
Act.:
Outflow to Purchase (100,000 -0- -0- -0-
Land )
Cash Flows From Fin.
Act.:
Inflow from Loan 100,000 -0- -0- -0-
10-84
Outflow to Repay Loan (21,547) (23,702) (26,072) (28,679)
Net Cash Flow from Fin. 78,453 (23,702 (26,072) (28,679)
Act.
Net Change in Cash 8,453 8,453 8,453 8,453
Plus: Beginning Cash -0- 8,453 16,906 25,359
Balance
Ending Cash Balance $ 8,453 $16,906 $25,359 $33,812
PROBLEM 10-25B (cont.)
10-85
PROBLEM 10-26B
a.
Libby Company
Income Statement
For the Year Ended December 31, 2006
Service Revenue $30,000
Expenses
Interest Expense (8,441)
Net Income $21,559
10-86
PROBLEM 10-26B a. (cont.)
Libby Company
Financial Statements
Balance Sheet
As of December 31, 2006
Assets
Cash ($10,000 + $21,559) $31,559
Total Assets $31,55
9
Liabilities $10,00
0
Stockholders’ Equity
Common Stock $ -0-
Retained Earnings 21,559
Total Stockholders’ Equity 21,559
Total Liabilities and Stockholders’ $31,55
Equity 9
Statement of Cash Flows
For the Year Ended December 31, 2006
Cash Flows From Operating
Activities:
Inflow from Revenue $30,000
Outflow for Interest (8,441)
Net Cash Flow from Operating $21,55
Activities 9
Cash Flows From Investing -0-
Activities
Cash Flows From Financing
Activities:
Inflow from Loan 150,000
Outflow to Repay Loan (140,000
)
Net Cash Flow from Financing 10,000
Activities
10-87
Net Change in Cash 31,559
Plus: Beginning Cash Balance -0-
Ending Cash Balance $31,55
9
10-88
PROBLEM 10-26B (cont.)
10-89
PROBLEM 10-27B
Transactions:
1. Issued bonds at 96. Cash proceeds = $384,000; Discount =
$16,000.
2. Purchased land for $384,000.
3. Land rental, $50,000 per year, 2005, 2006, 2007.
4. Interest payments per year, $32,000, 2005, 2006, 2007.
5. Amortized discount per year, $800.
6. Sold the land for $400,000, 1/1/08.
7. Paid off bonds at 98, Cash payment of $392,000.
10-90
PROBLEM 10-27B (cont.) T-Accounts Provided for Instructor’s
Use:
Cash Bonds Payable Retained Earnings
2005 2005 2005
1. 384,000 2. 384,000 1. 400,000 cl 17,200
3. 50,000 4. 32,000 Bal. Bal. 17,200
400,000
Bal. 18,000 2008 2006
2006 7. cl. 17,200
400,000
3. 50,000 4. 32,000 Bal. -0- Bal. 34,400
Bal. 36,000 2007
2007 Discount on Bonds cl. 17,200
Pay.
3. 50,000 4. 32,000 2005 Bal. 51,600
Bal. 54,000 1. 16,000 5. 800 2008
2008 Bal. cl 10,400
15,200
6. 400,000 7. 392,000 2006 Bal. 62,000
Bal. 62,000 5. 800
Bal. Rental Income
14,400
Land 2007 2005
2005 5. 800 cl 50,000 3. 50,000
2. 384,000 Bal.13,600 2006
Bal. 2008 cl 50,000 3. 50,000
384,000
2008 7. 13,600 2007
6. 384,000 Bal. -0- 50,000 3. 50,000
Bal. -0- Bal. -0-
Interest Expense
2005
4. 32,000
5. 800 cl 32,800
2006
4. 32,000
5. 800 cl 32,800
2007
4. 32,000
5. 800 cl 32,800
Bal. -0-
Gain on Sale of Land
2008
cl 16,000 6. 16,000
Bal. -0-
10-91
Loss on Bond
Redempt.
2008
7. 5,600 cl 5,600
Bal. -0-
10-92
PROBLEM 10-27B (cont.)
Box Company
Financial Statements
Income Statements 2005 2006 2007 2008
Rent Revenue $50,00 $50,00 $50,00 $
0 0 0 -0-
Interest Expense (32,800 (32,800 (32,80 -0-
) ) 0)
Operating Income 17,200 17,200 17,200 -0-
Non-Operating
Income/Expense
Gain on Sale of Land -0- -0- -0- 16,000
Loss on Bond Redemption -0- -0- -0- (5,600)
Net Income $17,20 $17,20 $17,20 $10,40
0 0 0 0
Statement of Changes in
Stockholders’ Equity 2005 2006 2007 2008
Common Stock $ $ $ $ -0-
-0- -0- -0-
Beginning Retained -0- 17,200 34,400 51,600
Earnings
Plus: Net Income 17,200 17,200 17,200 10,400
Ending Retained Earnings 17,200 34,400 51,600 62,000
Total Stockholders’ Equity $17,20 $34,40 $51,60 $62,00
0 0 0 0
10-93
PROBLEM 10-27B (cont.)
10-95
PROBLEM 10-28B
a. The bonds sold for less than the face amount; therefore,
the bonds were sold at a discount. This means that the
stated rate of interest is less than the market rate of
interest. The amount of the discount acts to equate the
two interest rates. If the bonds had been sold at the face
amount, Joy would have received $100,000 in cash.
b.
Date Account Titles Debit Credit
2006
Jan. 1 Cash 96,000
Discount on Bonds Payable 4,000
Bonds Payable 100,000
Dec. Interest Expense1 10,000
31
Cash 10,000
Dec. Interest Expense2 400
31
Discount on Bonds Payable 400
Dec. Retained Earnings 10,400
31
Interest Expense 10,400
2007
Dec. Interest Expense 10,000
31
Cash 10,000
Dec. Interest Expense 400
31
Discount on Bonds Payable 400
Dec. Retained Earnings 10,400
31
Interest Expense 10,400
1
$100,000 x 10% = $10,000
10-96
2
$4,000 ÷ 10 = $400
10-97
PROBLEM 10-28B (cont.)
c.
2006 2007
Liabilities
Bonds Payable $100,000 $100,000
Less: Discount on Bonds (3,600) (3,200)
Payable
Carrying Value of Bonds $ 96,400 $ 96,800
Payable
2006 2007
d Interest Expense Reported on Income $10,40 $10,40
. Statement: 0 0
2006 2007
e Interest Paid in Cash to Bondholders: $10,00 $10,00
. 0 0
10-98
PROBLEM 10-29B
Stafford Co.
Even Type Common Retaine Net
t No. of Assets = Liabilitie + Stock + d Income Cash
Event s Earning Flow
s
1. AS + = NA + + + NA NA + FA
2. AS + = + + NA + NA NA + FA
3. AE +− = NA + NA + NA NA − IA
4. AS + = NA + NA + + + + OA
5. CE NA = + + NA + − − NA
6. AU − = NA + NA + − − − OA
7. Closin NA = NA + NA + +/− NA NA
g
8. Closin NA = NA + NA + −/+ NA NA
g
9. AS + = NA + NA + + + + OA
10. CE NA = + + NA + − − NA
11. AU − = NA + NA + − − − OA
12. Closin NA = NA + NA + +/− NA NA
g
13. Closin NA = NA + NA + −/+ NA NA
g
14. AS/AE + = NA + NA + + + + IA
15. AU − = − + NA + NA NA − FA
10-99
PROBLEM 10-30B
a.
Effect of Transactions on Financial Statements
Rev./ Exp./
No. Assets = Liab. + S. Gain − Loss =Net Inc. Cash Flows
Equity
1. 300,000 = 300,000 + NA NA − NA = NA 300,000 FA
2. (30,000) = NA +(30,000 NA − 30,00 =(30,000 (30,000) OA
) 0 )
3. (315,000 = (300,000 +(15,000 NA − 15,00 =(15,000 (315,000) FA
) ) ) 0 )
b.
General Journal
Date Account Titles Debit Credit
1. Cash 300,000
Bonds Payable 300,000
2. Interest Expense1 30,000
Cash 30,000
3. Bonds Payable 300,000
Loss on Redemption of Bonds 15,000
Cash2 315,000
1
$300,000 x 10% = $30,000
2
$300,000 x 105% = $315,000
10-
100
PROBLEM 10-31B
a.
Bond Issued at Face Value
Effect of Transactions on Financial Statements
b.
Bond Issued at a Discount
Effect of Transactions on Financial Statements
c.
Bond Issued at a Premium
Effect of Transactions on Financial Statements
10-
101
PROBLEM 10-32B
b.
Date Account Titles Debit Credit
1/1/04 Cash 467,912
Discount on Bonds Payable 32,088
Bonds Payable 500,000
c.
Calculation of Interest Expense and Discount Amortization:
Bond Interest Discount
Bond Unamort. Carrying Exp. Interest Paid Amortized
Date Payable Discount Value (CV x 9%) (BP x 8%) (Exp. − Paid)
ATC 10-1
10-
102
a. Dell’s balance sheet lists “Long-term debt” of $509
million and “Other” noncurrent debt of $761 million.
The “Long-term Debt and Interest Rate Risk
Management” note on page 36 indicates that $200
million of this is for notes payable due in 2008, and
$300 million is for debentures due in 2028. The
“Other” noncurrent liabilities of $761 million are
described on page 42 as consisting of $306 million
for “Deferred income,” and $455 million for “Other”.
10-
103
ATC 10-2
a.
(1)(a)
Lot, Inc.: $100,000 x 102.25% = $102,250
Max, Inc.: $100,000 x 98% = $98,000
Par, Inc.: $100,000 x 104% = $104,000
(1)(b)
Interest Expense = Interest paid +/− amortized discount/premium.
Amortization of premium or discount:
Lot, Inc.: Premium amortization = $2,250 ÷ 5 = $450 per year.
Max, Inc.: Discount amortization = $2,000 ÷ 5 = $400 per year.
Par, Inc.: Premium amortization = $4,000 ÷ 5 = $800 per year.
Interest Expense:
Lot, Inc.: $8,000 − $450 = $7,550 per year.
Max, Inc.: $8,000 + $400 = $8,400 per year.
Par, Inc.: $8,000 − $800 = $7,200 per year.
(1)(c )
Interest Paid:
Lot, Inc.: Interest paid = $100,000 x 8% = $8,000 per year.
Max, Inc.: Interest paid = $100,000 x 8% = $8,000 per year.
Par, Inc.: Interest paid = $100,000 x 8% = $8,000 per year.
(2)
December 31, 2006
Lot Max Par
Liabilities
Bonds Payable $100,00 $100,00 $100,00
0 0 0
Less: Discount on Bonds (1,600)
Payable
Plus: Premium on Bonds 1,800 3,200
Payable
Carrying Value of Bonds $101,80 $ $103,20
Payable 0 98,400 0
10-
104
Lot, Inc. $2,250 − $450 = $1,800; Par, Inc. $4,000 − $800 =
$3,200
Max, Inc. $2,000 − $400 = $1,600
10-
105
ATC 10-2 (cont.)
10-
106
ATC 10-3
The credit ratings and the company to which each relates are as
follows:
A = Alltel
BB = Barnes & Noble (B&N)
CCC+ = Ameriking
D = Carmike
10-
107
There is also the fact that Alltel is a larger company than B&N,
and it is in an industry with more growth potential than is B&N.
10-
108
ATC 10-4
a. First, compute the EBIT for each company:
Quality Super Lawn
Landscaping Care
Debt-to-assets:
Current ratio:
b. Return-on-equity:
Return-on-assets:
10-
109
ATC 10-4 b.(cont.)
10-
110
ATC 10-5
If Bonds If
Stock
Currently Are Issued Is
Issued
Current ratio 1.54/1 (1) 3.08/1 (2)
3.08/1 (2)
Debt to assets ratio 69.2% (3) 76.5% (4)
52.9% (5)
b. Bonds Stock
EBIT $50,000 $50,000
Interest expense 10,000 -0-
10-
111
Pretax earnings 40,000
50,000
Tax expense (30%) 12,000
15,000
Net earnings 28,000 35,000
Dividends -0-
10,000
Additional retained earnings $28,000
$25,000
10-
112
ATC 10-6
a.
Mack Company
Selected Financial Statements for 2003
Type of Financing
Debt Equity
Income Statement for 2003
Rental Revenue ($50,000 x .15) $7,500 $7,500
Interest Expense (5,000) -0-
Net Income Before Tax 2,500 7,500
Income Tax Expense (30%) (750) (2,250)
Net Income After Tax $1,750 $5,250
Statement of Cash Flows for 2003
Cash Flows From Operating
Activities
Inflow from Revenue $7,500 $7,500
Outflow for Interest Expense (5,000) -0-
Outflow for Tax Expense (750) (2,250)
Net Cash Flow from Operating 1,750 5,250
Activities
Cash Flows from Investing Activities -0- -0-
Cash Flows From Financing Activities
Issue of Bonds 50,000 -0-
Issue of Stock -0- 50,000
Payment of Dividends -0- (5,000)
Net Cash Flow from Financing 50,000 45,000
Activities
Net Change in Cash 51,750 50,250
Add, Beginning Cash Balance -0- -0-
Ending Cash Balance $51,750 $50,250
10-
113
ATC 10-6 (cont.)
10-
114
ATC 10-7
a. Forecast Statements
Forecast Forecast Forecast
Financial Statements 1 2 3
Income Statements
Revenue $120,000 $160,000 $160,000
Operating Expenses (70,000) (77,000) (77,000)
Income Before Interest and Taxes 50,000 83,000 83,000
Interest Expense -0- -0- (11,620)
Income Tax Expense (30%) (15,000) (24,900) (21,414)
Net Income $ 35,000 $ 58,100 $ 49,966
Statements of Changes in Stockholders’ Equity
Beginning Retained Earnings $15,000 $15,000 $15,000
Plus: Net Income 35,000 58,100 49,966
Less: Dividend to Watson -0- (11,620) -0-
Ending Retained Earnings $50,000 $61,480 $64,966
Balance Sheets
Assets (see Note 1 below) $400,000 $511,480 $514,966
Liabilities $ -0- $ -0- $100,000
Stockholders’ Equity
Common Stock 350,000 450,000 350,000
Retained Earnings 50,000 61,480 64,966
Total Liab. And Stockholders’ Equity $400,000 $511,480 $514,966
10-
115
ATC 10-7 (cont.)
Forecast 3 − Forecast 2=
Differenc
e
Ret. $64,966 − $61,480 = $3,486
Earnings
10-
116
ATC 10-8 Using the EDGAR Database
10-
117
same date, Delta had committed to make future
payment of $15,120(!) for operating leases, of which
none showed up on the balance sheet as liabilities.
10-
118