E14-5
FV=600,000
n=3 PV= 427,068 i=12% Journal entries
Jan 1/12 Land 427,068 Note payable 427,068
Dec 31/12 Interest expense 51248 Note payable 51248

Discuss: As we see, for this transaction, the land exchange by the notes with present value is 427,068 which is higher than the assessed value of land (390,000). It indicates that the land was bought with the price higher than its value at the point of exchange.

b/ Prepare journal entries for transaction and interest expense
FV =4000000
N=4 PV = 2732,054
Rates 10% Cash 4000,000 Note payable 4000,000

Expense reported on Dec 2012 is Interest expense 273,205 (= 2732,054 *10% ) Note payable 126795 A/c payable 400,000

E14-17
IFRS – effective interest table from intercept to redemption
FV= 800,000; PV= - 784,000; N=40; PMT= 48,000, i= 6.1352 % Effective rate is 12.2704%

DATE | Carrying value | Discount amortization | Interest paid | Interest expense | Discount balance | Face value | 6/30/2004 | 784,000.00 | 99.97 | 48,000.00 | 48,099.97 | 16,000.00 | 784,099.97 | 12/31/2004 | 784,099.97 | 106.10 | 48,000.00 | 48,106.10 | 15,900.03 | 784,206.07 | 6/30/2005 | 784,206.07 | 112.61 | 48,000.00 | 48,112.61 | 15,793.93 | 784,318.68 | 12/31/2005 | 784,318.68 | 119.52 | 48,000.00 | 48,119.52 | 15,681.32 | 784,438.20 |

6/30/2006 | 784,438.20 | 126.85 | 48,000.00 | 48,126.85 | 15,561.80 | 784,565.05 | 12/31/2006 | 784,565.05 | 134.64 | 48,000.00 | 48,134.64 | 15,434.95 | 784,699.69 | 6/30/2007 | 784,699.69 | 142.90 | 48,000.00 | 48,142.90 | 15,300.31 | 784,842.58 | 12/31/2007 | 784,842.58 | 151.66 | 48,000.00 | 48,151.66 | 15,157.42 | 784,994.24 | 6/30/2008 | 784,994.24 | 160.97 | 48,000.00 | 48,160.97 | 15,005.76 | 785,155.21 | 12/31/2008 | 785,155.21 | 170.84 | 48,000.00 | 48,170.84 | 14,844.79 | 785,326.05 | 6/30/2009 | 785,326.05 | 181.32 | 48,000.00 | 48,181.32 | 14,673.95 | 785,507.38 | 12/31/2009 | 785,507.38 | 192.45 | 48,000.00 | 48,192.45 | 14,492.62 | 785,699.83 | 6/30/2010 | 785,699.83 | 204.26 | 48,000.00 | 48,204.26 | 14,300.17 | 785,904.08 | 12/31/2010 | 785,904.08 | 216.79 | 48,000.00 | 48,216.79 | 14,095.92 | 786,120.87 | 6/30/2011 | 786,120.87 | | | | 13,879.13 | | | | 2,120.87 | 672,000.00 | 674,120.87 | 2,120.87 | | Retirement of old bonds
Bond payable 786121 Loss on redemption of bond 45879 Cash 832000

New bonds issue Cash 1020000 Bond payable 1020,000

b/ Effective interest
FV=1000000;
PMT= 50,000; R= 4.8853% so effective interest is 9.7705%
PV= 1020000;
N=40
Entries on Dec 2011 Interest expense 49830 (=1020000 x 4.8853%) Bond payable 170 Acct Payable 50000

E14.15
Journal entries for
1/ Issuance of bond on June 30/11 Cash 4300920 Bond payable 4300920

2/ Payment of interest and amortization of premium on Dec 31/11 Interest expense 258055 (=4300 920 x 12% ÷2) Bond