
1.
Prepare for Company I the long-term liabilities section for the year ended December 31, 2016.
1.

Explanation of Solution
Prepare for Company I the long-term liabilities section for the year ended December 31, 2016.
Particulars | Amount in $ |
Long -term liabilities: | |
9% unsecured note payable to bank, due in annual principal instalments of $800,000, less current portion (1) | 3,200,000 |
11% debenture bonds payable due December 31, 2028, plus unamortized premium of $337,640 (2) | 5,337,640 |
Total long-term liabilities | 8,537,640 |
(Table 1)
Working notes:
(1) Calculation of 9% of notes payable to bank:
Particulars | Amount in $ |
9% of notes payable to bank: | |
Notes payable, 11/2/16 | $ 4,000,000 |
Deduct instalment due 11/2/17 | ($ 800,000) |
Long-term portion,12/31/16 | $ 3,200,000 |
(Table 2)
(2) Calculation of debenture on bonds payable:
Particulars | Amount in $ | Amount in $ |
Carrying amount, 12/31/15 | 5,352,400 | |
Deduct amortization of bond premium: | ||
Interest paid 12/31/16 | 550,000 | |
Less: effective interest | (535,240) | (14,760) |
Carrying amount, 12/31/16 | 5,337,640 |
(Table 3)
2.
Prepare Company I’s shareholder’s equity section for the year ended December 31, 2016,
2.

Explanation of Solution
Prepare Company I’s shareholder’s equity section for the year ended December 31, 2016, balance sheet.
Company I | ||
Shareholder's equity section | ||
For the year ended December 31,2016 | ||
Particulars | Amount in $ | Amount in $ |
Contributed Capital: | ||
Common stock, $10 par; 2,000,000 shares authorized; 840,000 shares issued; 829,500 shares outstanding(3) | 8,400,000 | |
Additional paid-in capital: (4) | 2,485,000 | |
Retained earnings (5) | 4,765,000 | |
Accumulated other comprehensive income (loss): | ||
Unrealized decrease in value of marketable equity Securities (6) | (20,000) | |
Total contributed capital, retained earnings, and accumulated other comprehensive loss | 15,630,000 | |
Less: | (130,000) | |
Total Shareholders’ Equity | 15,500,000 |
(Table 4)
Working notes:
(3) Calculate the amount of common stock issued:
Particulars | Date | Shares | Amount in $ |
Balance | December 31,2015 | 5,150,000 | |
Add: 5% stock dividend issued | March 3, 2016 | (150,000) | |
Balance | December 31,2016 | 8,400,000 |
(Table 5)
(4) Calculate the amount of additional paid-in capital on common stock:
Particulars | Amount in $ |
Balance, December 31, 2015 | 3,500,000 |
Deduct: Treasury stock reissued 1/16/2016 | (30,000) |
Stock dividend issued on March 3, 2016 | 160,000 |
Balance, December 31, 2016 | 2,485,000 |
(Table 6)
(5) Calculate the amount of retained earnings:
Particulars | Amount in $ |
Balance, December 31, 2015 | 2,465,000 |
Deduct : Stock dividend issued, 3/2/2016 | (560,000) |
Net income for 2016 | 2,860,000 |
Balance, December 31, 2016 | 4,765,000 |
(Table 7)
(6) Calculate the amount of unrealised decrease in the value of available-for-sale of securities:
(7) Calculate the amount of treasury stock at cost:
3.
Prepare a schedule representing the interest expense for the year ended December 31, 2016.
3.

Explanation of Solution
Prepare a schedule representing the interest expense for the year ended December 31, 2016.
Particulars | Amount in $ |
Interest expense: | |
Note payable to bank (8) | 60,000 |
Debenture bonds payable (9) | 535,240 |
Total interest expense | 595,240 |
(Table 8)
Working notes:
(8) Calculate the amount of interest expense on the notes payable on bank:
(9) Calculate the amount of interest expense on debentures bond payable:
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Chapter 16 Solutions
Intermediate Accounting: Reporting and Analysis, 2017 Update
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning

