On January 1, 2018, Baddour, Inc., issued 12% bonds with a face amount of $170 m
ID: 2521084 • Letter: O
Question
On January 1, 2018, Baddour, Inc., issued 12% bonds with a face amount of $170 million. The bonds were priced at $149.0 million to yield 14%. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Baddour report in its balance sheet at September 30, 2018?
2. What amount(s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2018?
3. What amount(s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2018? In which section(s) should the amount(s) appear?
(For all requirements, Enter your answers in whole dollars.)
Explanation / Answer
Amortization table: Date Cash Interest Interest Expense Discount Unamortized Carrying Amortized Discount Value 30.06.2018 10,200,000 10,430,000 230,000 20,770,000 149,230,000 31.12.2018 10,200,000 10,446,100 246,100 20,523,900 149,476,100 Req 1: Sep 30: Half second period interest is payable: Interest expense (10446,100/2) 5223050 Cash Interest payable (10200,000/2) 5100000 Dsicount amortized (246,100/2) 123050 Total Discount amortized on Sep 30 (230000+123050): $ 353,050 Balance Sheet on Sep 30'2018 Bonds payable 170,000,000 Less: Discount on bonds payable 20646950 (21000,000-353050) Net value of Bonds payable 149,353,050 Interest payable: 5,100,000 (cash interest payable) Req 2: Interest expense for Year to be shown in Income Statement: Interest expense for June30 10,430,000 Interest expense for Sep30 5,223,050 Total Interest expense shown in Income Sstatement 15,653,050 Req 3: Items shown in Cashflows of Financing activities: Sale of Bonds 149,000,000 (Inflow in financing) Interest paid in cash 10,200,000 (Outflow from Financing)