Question

Myriad Solutions, Inc., issued 10% bonds, dated January 1, with a face amount of $320 million on January 1, 2018, for $283,294,720. The bonds mature on December 31, 2027 (10 years). For bonds of similar risk and maturity the market yield is 12%. Interest is paid semiannually on June 30 and December 31.

Indicate the amounts reported on the financial statements below for the year ending December 31, 2018.

Balance Sheet:

Net Liability _______

Income Statement:

Interest Expense _________

Statement of Cash Flows:

Operating ________

Investing ________

Financing ________

Answer 1

Solution:

Effective Interest Amortizatiin Table
Semiannual period-End	Cash interest paid	Bond Interest expense	Discount amortization	Unamortized Discount	Carrying value
01-01-2018				36705280	283294720
6/30/2018	$1,60,00,000	$1,69,97,683	997683	35707597	284292403
12/31/2018	$1,60,00,000	$1,70,57,544	1057544	34650053	285349947

Balance Sheet:
Net Liability	285349947	Carrying value
Income Statement:
Interest Expense	$3,40,55,227	Total Interest expense for year 2018
Statement of Cash Flows:
Operating	-$3,20,00,000	Total Cash paid for Interest
Investing	0
Financing	283294720	Issue price of bonds