Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money. Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate. In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium. Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known. To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

Question

Morrison Construction, a manufacturer of cement products, buys raw limestone on credit on July 10. It processes this limestone to make cement powder on July 15 and pays cash for the raw limestone on July 25. On August 2, it sells the cement powder to a construction supply company, and on August 16, it receives a cash payment for this sale. What is the length of the cash cycle in this case?

Answer 1

Question

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Morrison Construction, a manufacturer of cement products, buys raw limestone on credit on July 10. It processes this limestone to make cement powder on July 15 and pays cash for the raw limestone on July 25. On August 2, it sells the cement powder to a construction supply company, and on August 16, it receives a cash payment for this sale. What is the length of the cash cycle in this case?

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The equity of Alliance Company is $198,300 and the total liabilities are $16,700. The total assets are _.

Answer 2

Question

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Answer 3

Question

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Answer 4

Question

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Answer 5

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 6

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

Answer 7

Chapter 12, Problem 12.38AP

1.

To determine

Time value of money: Any amount invested today earns an additional income, called interest income, after a certain period. This is called as time value of money.

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

Effective-interest amortization method: Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To calculate: The amount (present value) that company receive upon the issuance of the bonds payable.

Answer 8

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

Answer 9

2.

To determine

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

Answer 10

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

Answer 11

3.

To determine

To Journalize: Issuance of the bonds on January 1, 2018.

Answer 12

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

Answer 13

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

Answer 14

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 15

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 16

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Answer 17

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Ch. 12 - Prob. 1QC Ch. 12 - Daniels's bonds payable carry a stated interest...Ch. 12 - A bond that matures in installments at regular...Ch. 12 - Prob. 4QC Ch. 12 - Nicholas Smith Fitness Gym has 700,000 of 20-year...Ch. 12 - Prob. 6QC Ch. 12 - Prob. 7QC Ch. 12 - The debt to equity ratio is calculated as a. Total...Ch. 12 - Mike Gordon wishes to have 80,000 in five years....Ch. 12 - Prob. 10QC

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To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

To Journalize: Issuance of the bonds on January 1, 2018.

To Journalize: First semiannual interest payment and amortization of the bonds.

To Journalize: Second semiannual interest payment and amortization of the bonds.

Chapter 12 Solutions