Question

On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $162 million. The bonds were priced at $141.8 million to yield 12%. 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.)

Net Bonds Payable?

Interest Payable?

Interest Expense for Fiscal 2018?

Sale of Bonds?

Cash Interest Paid?

Thanks.

Answer 1

1	Liabilities at sep 30, 2018
	Bond Payable	$162,000,000
	Less: Discount	$20,200,000
	Initial balance, January 1, 2018	$141,800,000
	June 30, 2018 discount amortization	$408,000
	September 30, 2018 discount amortization	$216,240
	September 30, 2018, net bond payable	$142,424,240
	Discount (June 30)
	Interest exp (6% x $141,800,000)	$8,508,000
	Dsicount on bond payable	$408,000	(balance)
	Cash (5% x $162,000,000)	$8,100,000
	Discount (Sep 30)
	Interest exp [6% x ($141,800,000+ $400,000) x 3/6]	$4,266,240
	Dsicount on bond payable	$216,240	(balance)
	Cash (5% x $162,000,000 x 3/6)	$4,050,000
2
	June 30, 2018 interest expenses	$8,508,000
	Sep 30, 2018 interest expenses	$4,266,240
	Interest exp for fiscal year 2018	$12,774,240
3	Baddour would report the cash inflow of $141,800,000 from the sale of
	the bonds as a cash flow from financing activities in its statement of cash flows
	The $8,100,000 cash interest paid is a cash outflow from operating activities
	because interest is an income statement (operating) item