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.)

1. Net Bond Payable
Interest Payable
2. Interest Expense for fiscal 2018
3. Sale of Bonds
Cash Interest Paid

Answer 1

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)