Question

On January 1, 2018. Baddour, Inc., issued 10% bonds with a face amount of $160 million. The bonds were priced at $140 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.) 1. Net bonds payable Interest payable Interest expense for fiscal 2018 Sale of bonds Cash interest paid

Answer 1

	5%	6%
year	Cash	interest	Discount	Carrying
	interest	expense	amortized	value
1/1/2018				140000000
6/30/2018	8000000	8400000	400000	140400000
12/31/2018	8000000	8424000	424000	140824000
	interest expense		6/30/2018	8400000
			12/31/2018	4212000
				12612000
	interest payable		160*1000000*10%*3/12=			4000000
	net bonds payable
	bonds payable				160000000
	less:Discount on bonds amortized				19388000
					140612000
1)	Net bonds payable				140612000
	interest payable				4000000
2)	Interest expense for fiscal 2018				12612000
3)	Sale of bonds				143600000	Financing activity
	Cash interest paid				12000000	operating activity