lOMoARcPSD|12515046
CHAPTER 14 Non-Current Liabilities
Accounting (Helwan University)
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CHAPTER14
NonCur
r
entLi
abi
l
i
t
i
es
ASSI
GNMENTCLASSI
FI
CATI
ONTABLE(
BYTOPI
C)
Topi
cs
Quest
i
ons
Br
i
ef
Exer
ci
ses Exer
ci
ses
1. Noncur
r
entl
i
abi
l
i
t
y
;
1,10,11,
cl
assi
ficat
i
on;defini
t
i
ons
. 19,20,22,
23,24
Concept
s
Pr
obl
ems f
orAnal
ysi
s
1,2
10,11
1,2,3
3,4,5,6,
7,8,9,10
1,2,3,
7,8,9,
10,14
1,3,6
2. I
ssuanceofbonds;t
ypes 2,3,4,
ofbonds
.
9,17
1,2,3,4,
5,6,7
3. Pr
emi
um anddi
scount
;
amor
t
i
z
at
i
onschedul
es
.
3,4,6,7,8 4,5,6,7,8, 1,2,3,4,
9,10,15
7,8,9,
10,14
1,2,3,4
13
3,4,5
5,6,7,8,
10,17
4. Ret
i
r
ementandr
ef
undi
ng 18,21
ofdebt
.
14,15,16
2,7,8,9,
10,14
5. I
mput
at
i
onofi
nt
er
es
ton
not
es
.
11,12,13, 9,10,
14,15
11,12
11,12,13
5,6
6. Di
scl
osur
esofnoncur
r
entobl
i
gat
i
ons
.
24,25,26
17
22
14
1,3,5
7. Debtext
i
ngui
shment
.
16,19,20
14,15
17,18,
19,20
12,13
11
8. Fai
rv
al
ueopt
i
on.
22,23
16
21
9. Conv
er
gence.
28,29,30
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141
lOMoARcPSD|12515046
ASSI
GNMENTCLASSI
FI
CATI
ONTABLE(
BYLEARNI
NG OBJECTI
VE)
Br
i
ef
Exer
ci
ses
Lear
ni
ngObj
ect
i
ves
Exer
ci
ses
Pr
obl
ems
1. Desc
r
i
bet
hef
or
mal
pr
ocedur
esassoci
at
ed
wi
t
hi
ssui
ngl
ongt
er
m debt
.
2. I
dent
i
f
yv
ar
i
oust
ypesofbondi
ssues
.
1,2
3. Desc
r
i
bet
heaccount
i
ngv
al
uat
i
on
f
orbondsatdat
eofi
ssuance.
1,2,3,4,
5,6,7,8
3,4,5,6,7,
8,9,10,14,
15,16
1,2,3,7,8,
9,10,14
4. Appl
yt
hemet
hodsofbonddi
scount
andpr
emi
um amor
t
i
z
at
i
on.
2,3,4,5,
6,7,8
3,4,5,6,7,
8,9,10,14,
15,16
1,2,3,4,7,
8,9,10,14
5. Expl
ai
nt
heaccount
i
ngf
orl
ongt
er
m
not
espay
abl
e.
9,10,11,12
11,12,13
5,6
6. Desc
r
i
bet
heaccount
i
ngf
ort
he
ext
i
ngui
shmentofnoncur
r
entl
i
abi
l
i
t
i
es
.
13,14,15
14,15,16,17, 2,7,8,9,
18,19,20
10,11,12,
13,14
7. Desc
r
i
bet
heaccount
i
ngf
ort
hef
ai
rv
al
ue
opt
i
on.
16
21
17
22
8. Expl
ai
nt
her
epor
t
i
ngofoffbal
ancesheet
financi
ngar
r
angement
s
.
9. I
ndi
cat
ehowt
opr
esentandanal
yz
e
noncur
r
entl
i
abi
l
i
t
i
es
.
142
14
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ASSI
GNMENTCHARACTERI
STI
CSTABLE
I
t
em
Descr
i
pt
i
on
Levelof
Di
fficul
t
y
Ti
me
(
mi
nut
es)
E141
E142
E143
E144
E145
E146
E147
E148
E149
E1410
E1411
E1412
E1413
E1414
E1415
E1416
E1417
E1418
E1419
E1420
E1421
E1422
Cl
assi
ficat
i
onofl
i
abi
l
i
t
i
es
.
Cl
assi
ficat
i
on.
Ent
r
i
esf
orbondt
r
ansact
i
ons
.
Ent
r
i
esf
orbondt
r
ansact
i
ons
.
Ent
r
i
esf
orbondt
r
ansact
i
ons
.
Amor
t
i
z
at
i
onschedul
e.
Det
er
mi
nepr
operamount
si
naccountbal
ances
.
Ent
r
i
esandquest
i
onsf
orbondt
r
ansact
i
ons
.
Ent
r
i
esf
orbondt
r
ansact
i
ons
.
I
nf
or
mat
i
onr
el
at
edt
ov
ar
i
ousbondi
ssues
.
Ent
r
i
esf
orz
er
oi
nt
er
est
bear
i
ngnot
es
.
I
mput
at
i
onofi
nt
er
est
.
I
mput
at
i
onofi
nt
er
estwi
t
hr
i
ght
.
Ent
r
yf
orr
et
i
r
ementofbond;bondi
ssuecos
t
s
.
Ent
r
i
esf
orr
et
i
r
ementandi
ssuanceofbonds
.
Ent
r
i
esf
orr
et
i
r
ementandi
ssuanceofbonds
.
Set
t
l
ementofdebt
.
Loanmodi
ficat
i
on.
Loanmodi
ficat
i
on.
Ent
r
i
esf
orset
t
l
ementofdebt
.
Fai
rv
al
ueopt
i
on.
Longt
er
m debtdi
scl
osur
e.
Si
mpl
e
Si
mpl
e
Si
mpl
e
Si
mpl
e
Si
mpl
e
Si
mpl
e
Moder
at
e
Moder
at
e
Moder
at
e
Si
mpl
e
Si
mpl
e
Si
mpl
e
Moder
at
e
Si
mpl
e
Si
mpl
e
Si
mpl
e
Moder
at
e
Moder
at
e
Moder
at
e
Moder
at
e
Moder
at
e
Si
mpl
e
15–20
15–20
15–20
15–20
15–20
15–20
15–20
20–30
15–20
20–30
15–20
15–20
15–20
20–25
12–16
10–15
15–20
20–30
25–30
20–25
20–25
10–15
P141
P142
P143
P144
P145
P146
Anal
y
si
sofamor
t
i
z
at
i
onschedul
eandi
nt
er
estent
r
i
es
.
I
ssuanceandr
et
i
r
ementofbonds
.
Negat
i
v
eamor
t
i
z
at
i
on.
Effect
i
v
ei
nt
er
estmet
hod.
Ent
r
i
esf
orz
er
oi
nt
er
est
bear
i
ngnot
e.
Ent
r
i
esf
orz
er
oi
nt
er
est
bear
i
ngnot
e;pay
abl
e
i
ni
nst
al
l
ment
s
.
I
ssuanceandr
et
i
r
ementofbonds;i
ncomest
at
ement
pr
esent
at
i
on.
Compr
ehensi
v
ebondpr
obl
em.
I
ssuanceofbondsbet
weeni
nt
er
es
tdat
es
,r
et
i
r
ement
.
Ent
r
i
esf
orl
i
f
ec
y
cl
eofbonds
.
Modi
ficat
i
onofdebt
.
Modi
ficat
i
onofnot
eunderdi
ffer
entci
r
cumst
ances
.
Debt
or
/
cr
edi
t
orent
r
i
esf
orcont
i
nuat
i
onofdebtwi
t
hnew
effect
i
v
ei
nt
er
est
.
Compr
ehensi
v
epr
obl
em;i
ssuance,cl
assi
ficat
i
on,
r
epor
t
i
ng.
Si
mpl
e
Moder
at
e
Moder
at
e
Moder
at
e
Si
mpl
e
Moder
at
e
15–20
25–30
20–30
40–50
15–25
20–25
Si
mpl
e
15–20
Moder
at
e
Moder
at
e
Moder
at
e
Moder
at
e
Moder
at
e
Moder
at
e
50–65
20–25
20–25
15–20
25–35
20–30
Moder
at
e
20–25
P147
P148
P149
P1410
P1411
P1412
P1413
P1414
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ut
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ASSI
GNMENTCHARACTERI
STI
CSTABLE(
Cont
i
nued)
I
t
em
CA141
CA142
CA143
CA144
CA145
CA146
144
Descr
i
pt
i
on
Bondt
heor
y
:st
at
ementoffinanci
alposi
t
i
on
pr
esent
at
i
ons
,i
nt
er
estr
at
e,pr
emi
um.
Var
i
ousnoncur
r
entl
i
abi
l
i
t
yconcept
uali
ssues
.
Bondt
heor
y
:pr
i
ce,pr
esent
at
i
on,andr
et
i
r
ement
.
Bondt
heor
y
:amor
t
i
z
at
i
onandgai
norl
ossr
ecogni
t
i
on.
Offbal
ancesheetfinanci
ng.
Bondi
ssue(
et
hi
cs
.
)
Levelof
Di
fficul
t
y
Ti
me
(
mi
nut
es)
Moder
at
e
25–30
Moder
at
e
Moder
at
e
Si
mpl
e
Moder
at
e
Moder
at
e
10–15
15–25
20–25
20–30
23–30
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i
ght©2011JohnWi
l
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ut
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lOMoARcPSD|12515046
ANSWERSTO QUESTI
ONS
1.(
a) Fundsmi
ghtbeobt
ai
nedt
hr
oughl
ongt
er
m debtf
r
om t
hei
ssuanceofbonds
,andf
r
om t
he
si
gni
ngofl
ongt
er
m not
esandmor
t
gages
.
(
b) A bondi
ndent
ur
ei
sacont
r
act
ualagr
eement(
si
gnedbyt
hei
ssuerofbonds)bet
weent
he
bondi
ssuerandt
hebondhol
der
s
.Thebondi
ndent
ur
econt
ai
nscov
enant
sorr
est
r
i
ct
i
onsf
or
t
hepr
ot
ect
i
onoft
hebondhol
der
s
.
(
c) Amor
t
gagei
sadocumentwhi
chdescr
i
best
hesec
ur
i
t
yf
oral
oan,i
ndi
cat
est
hecondi
t
i
ons
underwhi
cht
hemor
t
gagebecomeseffect
i
v
e(
t
hati
s
,condi
t
i
onsofdef
aul
t
)
,anddescr
i
bes
t
her
i
ght
soft
hemor
t
gageeunderdef
aul
tr
el
at
i
v
et
ot
hesecur
i
t
y
.Themor
t
gageaccompani
es
af
or
mal
pr
omi
ssor
ynot
eandbecomeseffect
i
v
eonl
yupondef
aul
toft
henot
e.
2.I
ft
heent
i
r
ebondmat
ur
esonasi
ngl
edat
e,t
hebondsar
er
ef
er
r
edt
oast
er
m bonds.Mor
t
gage
bondsar
esecur
edbyr
ealest
at
e.Col
l
at
er
alt
r
ustbondsar
esecur
edbyt
hesecur
i
t
i
esofot
her
c
or
por
at
i
ons
.Debent
ur
ebondsar
euns
ec
ur
ed.Thei
nt
er
es
tpay
ment
sf
ori
ncomebondsdependon
t
heexi
st
enceofoper
at
i
ngi
ncomei
nt
hei
ssui
ngcompany
.Cal
l
abl
ebondsmaybecal
l
edand
r
et
i
r
edbyt
hei
ssuerpr
i
ort
omat
ur
i
t
y
.Regi
st
er
edbondsar
ei
ssuedi
nt
henameoft
heownerand
r
equi
r
esur
r
enderoft
hecer
t
i
ficat
eandi
ssuanceofanewcer
t
i
ficat
et
ocompl
et
et
hesal
e.Abear
er
orcouponbondi
snotr
ecor
dedi
nt
henameoft
heownerandmaybet
r
ans
f
er
r
edf
r
om onei
nv
es
t
or
t
oanot
herbymer
edel
i
v
er
y
.Conver
t
i
bl
ebondsc
anbec
onv
er
t
edi
nt
oot
hers
ec
ur
i
t
i
esoft
hei
s
s
ui
ng
c
or
por
at
i
onf
oras
pec
i
fi
edt
i
meaf
t
eri
s
s
uanc
e.Commodi
t
ybackedbonds(
al
s
oc
al
l
edas
s
et
l
i
nk
ed
bonds
)ar
er
edeemabl
ei
nmeas
ur
esofacommodi
t
y
.Deepdi
scountbonds(
al
s
ocal
l
ed z
er
oi
nt
er
estbonds)ar
esol
datadi
scountwhi
chpr
ovi
dest
hebuy
er
’
st
ot
ali
nt
er
estpay
offatmat
ur
i
t
y
.
3.(
a) Yi
el
dr
at
e—t
her
at
eofi
nt
er
estact
ual
l
year
nedbyt
hebondhol
der
s;i
ti
ss
y
nonymouswi
t
ht
he
effect
i
v
eandmar
k
etr
at
es
.
(
b) Nomi
nalr
at
e—t
her
at
esetbyt
hepar
t
yi
ssui
ngt
hebondsandexpr
essedasaper
cent
ageof
t
heparv
al
ue;i
ti
ss
y
nonymouswi
t
ht
hest
at
edr
at
e.
(
c) St
at
edr
at
e—s
y
nonymouswi
t
hnomi
nalr
at
e.
(
d) Mar
k
etr
at
e—s
y
nonymouswi
t
hyi
el
dr
at
eandeffect
i
v
er
at
e.
(
e) Effect
i
v
er
at
e—s
y
nonymouswi
t
hmar
k
etr
at
eandyi
el
dr
at
e.
4.(
a) Mat
ur
i
t
yv
al
ue—t
hef
acev
al
ueoft
hebonds;t
heamountwhi
chi
spay
abl
euponmat
ur
i
t
y
.
(
b) Facev
al
ue—s
ynonymouswi
t
hparv
al
ueandmat
ur
i
t
yv
al
ue.
(
c) Mar
k
etv
al
ue—t
heamountr
eal
i
z
abl
euponsal
e.
(
d) Parv
al
ue—s
y
nonymouswi
t
hmat
ur
i
t
yandf
acev
al
ue.
5.Adi
scountonbondspay
abl
er
esul
t
swheni
nv
est
or
sdemandar
at
eofi
nt
er
esthi
ghert
hant
her
at
e
st
at
edont
hebonds
.Thei
nv
est
or
sar
enotsat
i
sfiedwi
t
ht
henomi
nali
nt
er
estr
at
ebecauset
hey
canear
nagr
eat
err
at
eonal
t
er
nat
i
v
ei
nv
est
ment
sofequalr
i
sk
.Theyr
ef
uset
opayparf
ort
he
bondsandcannotchanget
henomi
nalr
at
e.Howev
er
,byl
ower
i
ngt
heamountpai
df
ort
hebonds
,
i
nv
est
or
scanal
t
ert
heeffect
i
v
er
at
eofi
nt
er
est
.A pr
emi
um onbondspay
abl
er
esul
t
sf
r
om t
he
opposi
t
econdi
t
i
ons
.Thati
s
,wheni
nv
est
or
sar
esat
i
sfiedwi
t
har
at
eofi
nt
er
estl
owert
hant
her
at
e
st
at
edont
hebonds
,t
heyar
ewi
l
l
i
ngt
opaymor
et
hant
hef
acev
al
ueoft
hebondsi
nor
dert
o
acqui
r
et
hem,t
husr
educi
ngt
hei
reffect
i
v
er
at
eofi
nt
er
estbel
owt
hest
at
edr
at
e.
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l
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eso,I
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ut
i
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Quest
i
onsChapt
er14(
Cont
i
nued)
6.Theamor
t
i
z
at
i
onofabondpr
emi
um decr
easesi
nt
er
estexpensewhi
l
et
heamor
t
i
z
at
i
onofabond
di
scounti
ncr
easesi
nt
er
es
texpenseov
ert
hel
i
f
eofabond.
7.Bond di
scountand bond pr
emi
um ar
e amor
t
i
z
ed on an effect
i
v
ei
nt
er
estbasi
s
.The effect
i
v
ei
nt
er
estmet
hodr
esul
t
si
n ani
ncr
easi
ng ordecr
eas
i
ng amountofi
nt
er
esteach per
i
od.Thi
si
s
becausei
nt
er
esti
sbasedont
hecar
r
yi
ngamountoft
hebondi
ssuanceatt
hebegi
nni
ngofeach
per
i
od.The effect
i
v
ei
nt
er
estmet
hod r
esul
t
si
n an i
ncr
easi
ng ordecr
easi
ng dol
l
aramountof
i
nt
er
estandaconst
antr
at
eofi
nt
er
estov
ert
hel
i
f
e oft
hebonds
.Thedi
ffer
encebet
weent
he
i
nt
er
estexpense and t
he i
nt
er
estpai
di
st
he amountofdi
scountorpr
emi
um amor
t
i
z
ed each
per
i
od.
8.Theannuali
nt
er
es
texpensewi
l
ldecr
easeeachper
i
odt
hr
oughoutt
hel
i
f
eoft
hebonds
.Undert
he
effect
i
v
ei
nt
er
estmet
hodt
hei
nt
er
estexpenseeachper
i
odi
sequalt
ot
heeffect
i
v
eoryi
el
di
nt
er
est
r
at
et
i
mest
hebookv
al
ueoft
hebondsatt
hebegi
nni
ngofeachi
nt
er
estper
i
od.Whenbondsar
e
sol
datapr
emi
um,t
hei
rbookv
al
uedecl
i
nest
of
acev
al
ueov
ert
hei
rl
i
f
e;t
her
ef
or
e,t
hei
nt
er
est
expensedecl
i
nesal
so.
9.Bondi
ssuancecos
t
sshoul
dber
ecor
dedasar
educt
i
ont
ot
hei
ssueamountoft
hebondpay
abl
e
and amor
t
i
z
ed i
nt
o expense ov
ert
he l
i
f
e oft
he bond,t
hr
ough an adj
ust
mentt
ot
he effect
i
v
ei
nt
er
estr
at
e.
10.Amor
t
i
z
at
i
onofbonddi
scountwi
l
li
ncr
easei
nt
er
es
texpense.Adi
scountonbondspay
abl
er
esul
t
s
wheni
nv
est
or
sdemandar
at
eofi
nt
er
es
thi
ghert
hant
her
at
est
at
edont
hebonds
.Thei
nv
est
or
s
ar
enotsat
i
sfiedwi
t
ht
henomi
nali
nt
er
es
tr
at
ebecauset
heycanear
nagr
eat
err
at
eonal
t
er
nat
i
v
e
i
nv
est
ment
sofequalr
i
sk
.Theyr
ef
uset
opayparf
ort
hebondsandcannotchanget
henomi
nal
r
at
e.Howev
er
,byl
ower
i
ngt
heamountpai
df
ort
hebonds
,i
nv
est
or
scani
ncr
easet
heeffect
i
v
er
at
e
ofi
nt
er
est
.
11.Theent
i
r
ear
r
angementmustbeev
al
uat
edandanappr
opr
i
at
ei
nt
er
es
tr
at
ei
mput
ed.Thi
si
sdone
by(
1)det
er
mi
ni
ngt
hef
ai
rv
al
ueoft
hepr
oper
t
y
,goods
,orser
vi
cesex
changedor(
2)det
er
mi
ni
ng
t
hef
ai
rv
al
ueoft
henot
e,whi
chev
eri
smor
ecl
ear
l
ydet
er
mi
nabl
e.
12.I
fanot
ei
si
ssuedf
orcash,t
hepr
esentv
al
uei
sassumedt
obet
hecashpr
oceeds
.I
fanot
ei
s
i
ssuedf
ornoncashconsi
der
at
i
on,t
hepr
esentv
al
ueoft
henot
eshoul
dbemeasur
edbyt
hef
ai
r
v
al
ueoft
hepr
oper
t
y
,goods
,orser
vi
cesorbyanamountt
hatr
easonabl
yappr
oxi
mat
est
hef
ai
r
v
al
ueoft
henot
e(
whi
chev
eri
smor
ecl
ear
l
ydet
er
mi
nabl
e)
.
13.Whenadebti
nst
r
umenti
sex
changedi
nabar
gai
nedt
r
ansact
i
onent
er
edi
nt
oatar
m’
sl
engt
h,t
he
st
at
edi
nt
er
es
tr
at
ei
spr
esumedt
obef
ai
runl
ess
:(
1)noi
nt
er
es
tr
at
ei
sst
at
ed,or(
2)t
hest
at
ed
i
nt
er
estr
at
ei
sunr
easonabl
e,or(
3)t
hest
at
edf
aceamountoft
hedebti
nst
r
umenti
smat
er
i
al
l
y
di
ffer
entf
r
om t
hecur
r
entsal
espr
i
cef
ort
hesameorsi
mi
l
ari
t
emsorf
r
om t
hecur
r
entf
ai
rv
al
ueof
t
hedebti
nst
r
ument
.
14.I
mput
edi
nt
er
esti
st
hei
nt
er
es
tf
act
or(
ar
at
eoramount
)assumedorassi
gnedwhi
chi
sdi
ffer
ent
f
r
om t
hest
at
edi
nt
er
es
tf
act
or
.I
ti
snecessar
yt
oi
mput
eani
nt
er
estr
at
ewhent
hest
at
edi
nt
er
es
t
r
at
ei
spr
esumedt
obeunr
easonabl
e.Thei
mput
edi
nt
er
es
tr
at
ei
susedt
oest
abl
i
sht
hepr
esent
v
al
ueoft
hedebti
nst
r
umentbydi
scount
i
ng,att
hati
mput
edr
at
e,al
lf
ut
ur
epayment
sont
hedebt
i
nst
r
ument
.
146
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
Quest
i
onsChapt
er14(
Cont
i
nued)
Not
et
oi
nst
r
uct
or
:I
ni
mput
i
ngi
nt
er
es
t
,t
heobj
ect
i
v
ei
st
oappr
oxi
mat
et
her
at
ewhi
chwoul
dhav
e
r
esul
t
edi
fani
ndependentbor
r
owerandani
ndependentl
enderhadnegot
i
at
edasi
mi
l
art
r
ansact
i
on
undercompar
abl
et
er
msandcondi
t
i
onswi
t
ht
heopt
i
ont
opayt
hecashpr
i
ceuponpur
chaseort
ogi
v
e
anot
ef
ort
heamountoft
hepur
chas
ewhi
c
hbear
st
hepr
ev
ai
l
i
ngr
at
eofi
nt
er
es
tt
omat
ur
i
t
y
.I
nor
dert
o
accompl
i
sh t
hatobj
ect
i
v
e,consi
der
at
i
on mustbe gi
v
en t
o(
1)t
he cr
edi
tst
andi
ng oft
he i
ssuer
,
(
2)r
est
r
i
ct
i
v
e cov
enant
s
,(
3)col
l
at
er
al
,(
4)paymentand ot
heri
t
emsper
t
ai
ni
ng t
ot
he debt
,(
5)t
he
exi
st
i
ngpr
i
mei
nt
er
estr
at
e,and(
6)t
hepr
ev
ai
l
i
ngr
at
esf
orsi
mi
l
ari
nst
r
ument
sofi
ssuer
swi
t
hsi
mi
l
ar
cr
edi
tr
at
i
ngs
.
15.Afixedr
at
emor
t
gagei
sanot
et
hatr
equi
r
espaymentofi
nt
er
es
tbyt
hemor
t
gagoratar
at
et
hat
doesnotchangedur
i
ngt
hel
i
f
eoft
henot
e.A var
i
abl
er
at
emor
t
gagei
sanot
et
hatf
eat
ur
esan
i
nt
er
estr
at
et
hatfluct
uat
eswi
t
ht
hemar
k
etr
at
e;t
hev
ar
i
abl
er
at
egener
al
l
yi
sadj
ust
edper
i
odi
cal
l
y
asspeci
fiedi
nt
het
er
msoft
henot
eandi
susual
l
yl
i
mi
t
edi
nt
heamountofeachchangei
nt
her
at
e
upordownandi
nt
het
ot
alchanget
hatcanbemadei
nt
her
at
e.
16.Thr
ee di
ffer
entt
ypes ofsi
t
uat
i
ons r
esul
twi
t
h ext
i
ngui
shment
s(
1)Set
t
l
ementwi
t
h cash;
(
2)Ex
changi
ngasset
sorsecur
i
t
i
es;and(
3)Modi
ficat
i
onoft
er
ms
.
17.Thecal
lf
eat
ur
eofabondi
ssuegr
ant
st
hei
ssuert
hepr
i
vi
l
egeofpur
chasi
ng,af
t
eracer
t
ai
ndat
e
atast
at
edpr
i
ce,out
st
andi
ngbondsf
ort
hepur
pos
eofr
educi
ngi
ndebt
ednessort
aki
ngadv
ant
age
ofl
oweri
nt
er
estr
at
es
.The cal
lf
eat
ur
e doesnotaffectt
he amor
t
i
z
at
i
on ofbond di
scountor
pr
emi
um;becauseear
l
yr
edempt
i
oni
snotacer
t
ai
nt
y
,t
hel
i
f
eoft
hebondsshoul
dbeusedf
or
amor
t
i
z
at
i
onpur
poses
.
18.I
ti
s somet
i
mes desi
r
abl
et
or
educe bond i
ndebt
edness i
n or
dert
ot
ak
e adv
ant
age ofl
ower
pr
ev
ai
l
i
ngi
nt
er
estr
at
es
.Al
sot
hecompanymaynotwantt
omak
eav
er
yl
ar
gecashout
l
ayal
lat
oncewhent
hebondsmat
ur
e.
Bondi
ndebt
ednessmayber
educedbyei
t
heri
ssui
ngbondscal
l
abl
eaf
t
eracer
t
ai
ndat
eandt
hen
cal
l
i
ngsomeoral
l
oft
hem,orbypur
chasi
ngbondsont
heopenmar
k
etandt
henr
et
i
r
i
ngt
hem.
Whenapor
t
i
onofbondsout
st
andi
ngi
sgoi
ngt
ober
et
i
r
ed,i
ti
snecessar
yf
ort
heaccount
antt
o
mak
esur
eanycor
r
espondi
ngdi
scountorpr
emi
um i
spr
oper
l
yamor
t
i
z
ed.Whent
hebondsar
e
ext
i
ngui
shed,anygai
norl
ossshoul
dber
epor
t
edasot
heri
ncomeandexpense.
19.A t
r
ans
f
erofnoncashasset
s(
r
ealest
at
e,r
ecei
v
abl
es
,orot
herasset
s)ort
hei
ssuanceoft
he
debt
or
’
ss
t
ockcanbeusedt
oset
t
l
eadebtobl
i
gat
i
oni
nanext
i
ngui
shment
.I
nt
hesesi
t
uat
i
ons
,t
he
noncashasset
sorequi
t
yi
nt
er
es
tgi
v
enshoul
dbeaccount
edf
oratt
hei
rf
ai
rv
al
ue.Thedebt
ori
s
r
equi
r
edt
odet
er
mi
net
heex
c
es
soft
hec
ar
r
y
i
ngamountoft
hepay
abl
eov
ert
hef
ai
rv
al
ueoft
heas
s
et
s
orequi
t
yt
r
ans
f
er
r
ed(
gai
n)
.Thedebt
orr
ec
ogni
z
esagai
nequalt
ot
heamountoft
heex
c
es
s
.I
n
addi
t
i
on,t
hedebt
orr
ecogni
z
esagai
norl
os
sondi
s
pos
i
t
i
onofas
s
et
st
ot
heex
t
entt
hatt
hef
ai
rv
al
ue
oft
hos
eas
s
et
sdi
ffer
sf
r
om t
hei
rcar
r
y
i
ngamount(
bookv
al
ue)
.
20.(
a) Thecr
edi
t
orwi
l
lgr
antconcessi
onsi
ndebtmodi
ficat
i
onsi
t
uat
i
onbecausei
tappear
st
obet
he
mor
el
i
k
el
ywayt
oensur
et
hehi
ghestpossi
bl
ecol
l
ect
i
onont
hel
oan.
(
b) Thecr
edi
t
ormi
ghtgr
antanyoneoracombi
nat
i
onoft
hef
ol
l
owi
ngconcessi
ons
:
1. Reducet
hef
aceamountoft
hedebt
.
2. Acceptnoncashasset
sorequi
t
yi
nt
er
est
si
nl
i
euofcashi
nset
t
l
ement
.
3. Reducet
hest
at
edi
nt
er
estr
at
e.
4. Ext
endt
hemat
ur
i
t
ydat
eoft
hef
aceamountoft
hedebt
.
5. Reduceordef
eranyaccr
uedi
nt
er
est
.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
147
lOMoARcPSD|12515046
Quest
i
onsChapt
er14(
Cont
i
nued)
21.The debt
orwi
l
lr
ecor
d a gai
n when t
he di
scount
ed r
est
r
uct
ur
ed cas
h fl
owsar
el
es
st
han t
he
car
r
y
i
ngv
al
ueoft
hel
oan.I
fagai
ni
sr
ecogni
z
ed,t
hemodi
fi
ednot
ei
sr
ecor
dedati
t
sf
ai
rv
al
ue.
Subsequentpayment
swi
l
li
ncl
udeachar
get
oI
nt
er
estExpensebasedont
hemar
k
et
i
nt
er
es
tr
at
e.
22.Thef
ai
rv
al
ueopt
i
ongi
v
escompani
est
hechoi
cet
or
ecor
dt
hei
rnoncur
r
entl
i
abi
l
i
t
i
esatf
ai
rv
al
ue.
Thecont
r
ov
er
s
yi
nappl
yi
ngt
hef
ai
rv
al
ueopt
i
oni
nv
ol
v
escompani
esr
ecor
di
nganunr
eal
i
z
edgai
n
wheni
t
sc
r
edi
twor
t
hi
nessi
sbecomi
ngwor
se.Thi
sdecl
i
ner
esul
t
si
nt
hef
ai
rv
al
ueoft
hedebt
decl
i
ni
ngr
esul
t
i
ngi
nanunr
eal
i
z
edgai
n.
23.Unr
eal
i
z
edHol
di
ngGai
norLoss
I
ncome.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. 2,
600
Not
ePay
abl
e(
€22,
600–€20,
000)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2,
600
24.Ther
equi
r
eddi
scl
osur
esatt
hest
at
ementoffinanci
alposi
t
i
ondat
ear
ef
ut
ur
epayment
sf
orsi
nki
ng
f
undr
equi
r
ement
sandt
hemat
ur
i
t
yamount
sofl
ongt
er
m debtdur
i
ngeachoft
henextfiv
ey
ear
s
.
25.Offbal
ancesheetfinanci
ngi
sanat
t
emptt
obor
r
ow moni
esi
nsuchawayt
hatt
heobl
i
gat
i
onsar
e
notr
ecor
ded.Reasonsf
oroffbal
ancesheetfinanci
ngar
e:
(
1) Manybel
i
ev
er
emovi
ngdebtenhancest
hequal
i
t
yoft
hest
at
ementoffinanci
alposi
t
i
onand
per
mi
t
sc
r
edi
tt
obeobt
ai
nedmor
er
eadi
l
yandatl
esscost
.
(
2) Loancov
enant
sar
el
essl
i
k
el
yt
obevi
ol
at
ed.
(
3) Theassetsi
deoft
hest
at
ementoffinanci
alposi
t
i
oni
sunder
st
at
edbecausef
ai
rv
al
uei
snot
used f
ormany asset
s
.As a r
esul
t
,notr
epor
t
i
ng cer
t
ai
n debtt
r
ansact
i
ons offset
st
he
nonr
ecogni
t
i
onoff
ai
rv
al
uesoncer
t
ai
nasset
s
.
26.For
msofoffbal
ancesheetfinanci
ngi
ncl
ude(
1)i
nv
est
ment
si
nnonconsol
i
dat
edsubsi
di
ar
i
esf
or
whi
cht
hepar
enti
sl
i
abl
ef
ort
hesubsi
di
ar
ydebt
;(
2)useofspeci
alpur
poseent
i
t
i
es(
SPEs)
,whi
ch
ar
eusedt
obor
r
ow moneyf
orspeci
alpr
oj
ect
s(
r
esul
t
i
ngi
nt
ak
eor
paycont
r
act
s)
;(
3)oper
at
i
ng
l
eases
,whi
ch when st
r
uct
ur
ed car
ef
ul
l
y gi
v
et
he company t
he benefit
s ofowner
shi
p wi
t
hout
r
epor
t
i
ngt
hel
i
abi
l
i
t
yf
ort
hel
easepayment
s
.
27.UnderI
FRS,apar
entcompanydoesnothav
et
oconsol
i
dat
easubsi
di
ar
ycompanyt
hati
sl
ess
t
han 50 per
centowned.I
n such cases
,t
he par
entt
her
ef
or
e doesnotr
epor
tt
he asset
sand
l
i
abi
l
i
t
i
esoft
he subsi
di
ar
y
.Al
lt
he par
entr
epor
t
son i
t
sst
at
ementoffinanci
alposi
t
i
on i
st
he
i
nv
est
menti
nt
hesubsi
di
ar
y
.Asar
esul
t
,user
soft
hefinanci
alst
at
ement
smaynotunder
st
andt
hat
t
hesubsi
di
ar
yhasconsi
der
abl
edebtf
orwhi
cht
hepar
entmayul
t
i
mat
el
ybel
i
abl
ei
ft
hesubsi
di
ar
y
r
unsi
nt
ofinanci
aldi
fficul
t
y
.
28.Amongt
hesi
mi
l
ar
i
t
i
esar
e:(
1)Bot
hI
FRS andU.
S.GAAP r
equi
r
et
hatcompani
esi
ndi
cat
et
he
cur
r
entpor
t
i
on ofl
ongt
er
m debt
,(
2)Bot
hI
FRS pr
ohi
bi
tt
he r
ecogni
t
i
on ofl
i
abi
l
i
t
i
esf
orf
ut
ur
e
l
osses;and(
3)I
FRSandU.
S.GAAPar
esi
mi
l
ari
nt
het
r
eat
mentofenvi
r
onment
all
i
abi
l
i
t
i
es
.
148
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
Quest
i
onsChapt
er14(
Cont
i
nued)
Al
t
hought
het
woI
FRSar
esi
mi
l
arwi
t
hr
espectt
oabov
et
opi
cs
,t
her
ear
edi
ffer
ences
,i
ncl
udi
ng:(
1)
UnderI
FRS,t
he measur
ementofa pr
ovi
si
on r
el
at
ed t
o a cont
i
ngenc
yi
sbased on t
he bes
t
est
i
mat
eoft
heexpendi
t
ur
er
equi
r
edt
oset
t
l
et
heobl
i
gat
i
on.I
far
angeofest
i
mat
esi
spr
edi
ct
ed
andnoamounti
nt
her
angei
smor
el
i
k
el
yt
hananyot
heramounti
nt
her
ange,t
he‘
mi
dpoi
nt
’of
t
her
angei
susedt
omeasur
et
hel
i
abi
l
i
t
y
.I
nU.
S.GAAP,t
hemi
ni
mum amounti
nar
angei
sused;
(
2)I
FRSper
mi
t
sr
ec
ogni
t
i
onofar
es
t
r
uc
t
ur
i
ngl
i
abi
l
i
t
y
,onc
eac
ompanyhasc
ommi
t
t
edt
oar
es
t
r
uct
ur
i
ngpl
an.U.
S.GAAPhasaddi
t
i
onalc
r
i
t
er
i
a(
i
.
e.
,r
el
at
edt
ocommuni
cat
i
ngt
hepl
ant
oempl
oy
ees
)
,
bef
or
ear
est
r
uct
ur
i
ng l
i
abi
l
i
t
ycan be est
abl
i
shed;and (
3)t
he r
ecogni
t
i
on cr
i
t
er
i
af
oran as
s
et
r
equi
r
ementobl
i
gat
i
onar
emor
es
t
r
i
ngentunderU.
S.GAAP—t
hel
i
abi
l
i
t
yi
snotr
ec
ogni
z
edunl
es
s
t
her
ei
sapr
esentl
egalobl
i
gat
i
onandt
hef
ai
rv
al
ueoft
heobl
i
gat
i
oncanber
easonabl
yest
i
mat
ed.
29.(
1) Cash.
.
.
.
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.
.
. 92,
608
BondDi
scount
.
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. 7,
392
BondsPay
abl
e.
.
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.
100,
000
(
2) I
nt
er
es
tExpense(
$92,
608X11%)
.
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.
. 10,
187
Cash(
$100,
000X9%)
.
.
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.
BondDi
scount
.
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.
9,
000
1,
187
(
3) BondsPay
abl
e.
.
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.
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.
.
.
.
.
.
.
.
.100,
000
LossonExt
i
ngui
shmentofBonds
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
. 5,
888
Cash(
$100,
000X101%)
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
.
.
.
.
BondDi
scount(
$7,
392–$1,
187–$1,
317*
)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
101,
000
4,
888
*
[
(
$92,
608+$1,
187)X11%]–$9,
000
30.Asi
ndi
cat
ed i
nt
he Conv
er
gence Cor
nerofChapt
er2,t
he I
ASB and FASB ar
e wor
ki
ng on a
concept
ualf
r
amewor
kpr
oj
ect
,par
tofwhi
chwi
l
lex
ami
net
hedefini
t
i
onofal
i
abi
l
i
t
y
.I
naddi
t
i
on,t
hi
s
pr
oj
ectwi
l
laddr
esst
hedi
ffer
encei
nmeasur
ement
susedbet
weenI
FRSandU.
S.GAAPf
orcont
i
ngentl
i
abi
l
i
t
i
es
.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
149
lOMoARcPSD|12515046
SOLUTI
ONSTO BRI
EFEXERCI
SES
BRI
EFEXERCI
SE141
Pr
esentval
ueoft
hepr
i
nci
pal
$500,
000X.
37689.
.
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.
. $188,
445
Pr
esentval
ueoft
hei
nt
er
estpayment
s
400
$22,
500X12.
46221.
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ssuepr
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ce.
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$468,
845
BRI
EFEXERCI
SE142
(
a)
(
b)
(
c)
Cash.
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.
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e.
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estExpense.
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000
Cash(
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000X10% X6/
12)
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000
BRI
EFEXERCI
SE143
(
a)
(
b)
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c)
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Cash(
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0811)
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330
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nt
er
estExpense(
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330X8% X6/
12)
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e.
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2
.,
027
Cash(
€300,
000X10% X6/
12)
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15,
000
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nt
er
estExpense
(
€324,
330–€2,
027)X8% X6/
12.
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.
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.
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.
.
.
1
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.
2
.,
892
BondsPayabl
e.
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.
.
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.
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.
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2
.,
108
I
nt
er
estPayabl
e.
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.
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.
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.
.
.
.
.
.
.
15,
000
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
BRI
EFEXERCI
SE144
(
a)
(
b)
(
c)
Cash(
€300,
000X.
926393)
.
.
.
.
.
.
.
.
.
.
.
.
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Copyr
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ght©2011JohnWi
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ey&Sons,I
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(
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31,
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2,
000
1,
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BRI
EFEXERCI
SE1412
Cash.
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60,
000
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
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orUseOnl
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
38,
131
21,
869
1413
lOMoARcPSD|12515046
BRI
EFEXERCI
SE1413
BondsPayabl
e.
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EFEXERCI
SE1414
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esPayabl
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BRI
EFEXERCI
SE1415
(
a)
(
b)
Pr
esentval
ueofr
est
r
uct
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edcashflows:
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esentval
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7,
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1414
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
BRI
EFEXERCI
SE1416
(
a)
(
b)
Unr
eal
i
z
edl
oss=$17,
500–$16,
000=$1,
500
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eal
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z
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di
ngGai
norLoss—I
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1
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,
500
Not
ePayabl
e.
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1,
500
BRI
EFEXERCI
SE1417
Noncur
r
entl
i
abi
l
i
t
i
es
BondsPayabl
e,dueJanuar
y1,2019.
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.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
$1,
912,
000
$ 80,
000
1415
lOMoARcPSD|12515046
SOLUTI
ONSTO EXERCI
SES
EXERCI
SE141(
15–20mi
nut
es)
(
a)
(
b)
(
c)
(
d)
(
e)
(
f
)
(
g)
(
h)
Cur
r
entl
i
abi
l
i
t
yi
fcur
r
entasset
sar
eusedt
osat
i
sf
yt
hedebt
.
Cur
r
entl
i
abi
l
i
t
y,$250,
000;l
ongt
er
ml
i
abi
l
i
t
y,$750,
000.
Cur
r
entl
i
abi
l
i
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y.
Pr
obabl
ynoncur
r
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,al
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houghi
foper
at
i
ngcycl
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eat
ert
hanone
yearand cur
r
entasset
s ar
e used,t
hi
si
t
em woul
d be cl
assi
fied as
cur
r
ent
.
Cur
r
entl
i
abi
l
i
t
y.
Cur
r
entl
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abi
l
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t
yunl
ess(
a)af
und f
orl
i
qui
dat
i
on hasbeen accumul
at
ed whi
ch i
snotcl
assi
fied asacur
r
entassetor(
b)ar
r
angement
s
havebeenmadef
orr
efinanci
ng.
Cur
r
entl
i
abi
l
i
t
y.
Cur
r
entl
i
abi
l
i
t
y.
EXERCI
SE142(
15–20mi
nut
es)
(
a) I
nt
er
estexpense (
cr
edi
tbal
ance)
—Recl
assi
f
yt
oi
nt
er
estpayabl
e on
st
at
ementoffinanci
alposi
t
i
on.
(
b) BondI
ssueCost
s—Reduct
i
onoft
hei
ssueamountoft
hebondpayabl
e.
(
c) Gai
n on r
epur
chase ofdebt
—Cl
assi
f
y as par
tofOt
heri
ncome and
expenseont
hei
ncomest
at
ement
.
(
d) Mor
t
gage payabl
e—Cl
assi
f
y onet
hi
r
d as cur
r
ent l
i
abi
l
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t
y and t
he
r
emai
nderasl
ongt
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ml
i
abi
l
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yonst
at
ementoffinanci
alposi
t
i
on.
(
e) Debent
ur
ebondspayabl
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assi
f
yasl
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ml
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abi
l
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yonst
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alposi
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on.
(
f
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espayabl
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f
yasl
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ml
i
abi
l
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t
yonst
at
ementoffinanci
al
posi
t
i
on.
1416
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
(
g) I
ncomebondspayabl
e—Cl
assi
f
yasl
ongt
er
ml
i
abi
l
i
t
yonst
at
ementof
financi
alposi
t
i
on.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1417
lOMoARcPSD|12515046
EXERCI
SE143(
15–20mi
nut
es)
1. Di
vacCompany:
(
a) 1/
1/
10
Cash.
.
.
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1419
lOMoARcPSD|12515046
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1421
lOMoARcPSD|12515046
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ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
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ForI
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uct
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
EXERCI
SE148(
Cont
i
nued)
(
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r
entLi
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t
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es:
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368,
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i
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l
ey&Sons
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nc. Ki
eso,I
FRS,1/
e,Sol
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onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1423
lOMoARcPSD|12515046
EXERCI
SE149(
15–20mi
nut
es)
(
a)
Januar
y1,2010
Cash.
.
.
.
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eofI
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zat
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veI
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hod
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dt
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d10%
Dat
e
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Cash
Pai
d
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nt
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est
Expense
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00 £86,
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000.
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000.
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c)
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estExpense
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e
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(
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nt
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Amountof
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87
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00
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
EXERCI
SE1410(
20–30mi
nut
es)
Unsecur
ed
Bonds
(
1) Mat
ur
i
t
yval
ue
Mor
t
gage
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000,
000
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000,
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000,
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10
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(
2) Numberofi
nt
er
est
per
i
ods
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at
edr
at
eperper
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od
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oCoupon
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13%
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4
0
(
4) Effect
i
ver
at
eperper
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od
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3% (
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(
5) Paymentamountper
per
i
od
$325,
000(a)
0
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000(b)
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250(d)
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6) Pr
esentval
ue
12%
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a)
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000,
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4=$325,
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c)
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esentval
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Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
$ 8,
475,
330
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829,
550
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304,
880
1425
lOMoARcPSD|12515046
EXERCI
SE1411(
15–20mi
nut
es)
(
a) 1.
Januar
y1,2011
Land.
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000
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000
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
EXERCI
SE1412(
15–20mi
nut
es)
(
a) Faceval
ueoft
hezer
oi
nt
er
est
bear
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ngnot
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scount
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eso,I
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1427
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EXERCI
SE1413(
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nued)
(
b) I
nt
er
estExpense(
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esPayabl
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ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
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ForI
nst
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lOMoARcPSD|12515046
EXERCI
SE1415(
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ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
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ForI
nst
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1429
lOMoARcPSD|12515046
EXERCI
SE1416(
10–15mi
nut
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Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
EXERCI
SE1417(
15–20mi
nut
es)
(
a) Tr
ansf
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oper
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Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
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y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
150,
000
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1431
lOMoARcPSD|12515046
EXERCI
SE1418(
25–30mi
nut
es)
(
a) Yes,Bar
kl
ey can r
ecor
d a gai
n on ext
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SE1419(
Cont
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Copyr
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ght©2011JohnWi
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lOMoARcPSD|12515046
EXERCI
SE1419(
Cont
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nued)
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1435
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ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
EXERCI
SE1421(
10–15mi
nut
es)
(
a)
December31,2010
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l
ey&Sons
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nc. Ki
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FRS,1/
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ForI
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1437
lOMoARcPSD|12515046
EXERCI
SE1422(
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nut
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AtDecember31,2010,di
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2012
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2014
2015
1438
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0
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ey&Sons,I
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eso,I
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
TI
MEANDPURPOSEOFPROBLEMS
Pr
obl
em 141(
Ti
me15–20mi
nut
es
)
Pur
pose—t
opr
ovi
det
hest
udentwi
t
ht
heoppor
t
uni
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yt
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pr
etabondamor
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i
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onschedul
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s
pr
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em r
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st
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onofsuchaschedul
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her
el
ev
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vi
dualnumber
s
.Thest
udenti
st
opr
epar
ej
our
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or
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nf
or
mat
i
ongi
v
eni
nt
he
bondamor
t
i
z
at
i
onschedul
e.
Pr
obl
em 142(
Ti
me25–30mi
nut
es
)
Pur
pose—t
opr
ovi
det
hest
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t
hanunder
st
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omak
et
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our
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yt
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ssuanceofbonds
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naddi
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i
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hebondsar
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her
ef
or
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t
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at
i
on
schedul
ehast
obepr
epar
ed.
Pr
obl
em 143(
Ti
me20–30mi
nut
es
)
Pur
pose—t
opr
ovi
det
hest
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omer
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em 144(
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me40–50mi
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)
opr
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pose—t
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me15–25mi
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pose—t
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Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1439
lOMoARcPSD|12515046
Ti
meandPur
poseofPr
obl
ems(
Cont
i
nued)
Pr
obl
em 149(
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me20–25mi
nut
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pose—t
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ovi
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ssuanceofbonds
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et
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.
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me20–25mi
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esoft
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ansact
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onofbonddi
scount
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nalent
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ansact
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ons
.
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me15–25mi
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pos
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me40–50mi
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.
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me20–25mi
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pose—t
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ovi
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h an under
st
andi
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eas r
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at
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o bonds
.
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v
ed wi
t
h accr
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nt
er
est
,and
di
scl
osur
er
equi
r
ement
s
.
1440
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
SOLUTI
ONSTO PROBLEMS
PROBLEM 141
(
a) Thebondswer
esol
datadi
scountof$5,
651.Evi
denceoft
hedi
scount
i
st
heJanuar
y1,2004bookval
ueof$94,
349,whi
chi
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mat
ur
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(
b) Thest
at
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at
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s11% (
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000÷$100,
000)
.Theeffect
i
ver
at
ei
s12%
(
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.
(
c)
(
d)
(
e)
Januar
y1,2004
Cash.
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y1,2011(
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)
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estExpense.
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712
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e.
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er
estPayabl
e.
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712
11,
000
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1441
lOMoARcPSD|12515046
PROBLEM 142
(
a) Pr
esentval
ueoft
hepr
i
nci
pal
$2,
000,
000X.
38554(
PV10,10%)
.
.
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.
.
.
.
.
$ 771,
080
Pr
esentval
ueoft
hei
nt
er
estpayment
s
$210,
000*X6.
14457(
PVOA10,10%)
.
.
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.
1,
290,
360
Pr
esentval
ue(
sel
l
i
ngpr
i
ceoft
hebonds)
.
.
.
.
.
.
.
.
.
$2,
061,
440
*
$2,
000,
000X10.
5% =$210,
000
Cash.
.
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2
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0
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6
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1
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440
BondsPayabl
e.
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(
b)
Dat
e
1/
1/
09
1/
1/
10
1/
1/
11
1/
1/
12
1/
1/
13
2,
061,
440
Cash
Pai
d
I
nt
er
est
Expense
Pr
emi
um
Amor
t
i
zat
i
on
Car
r
yi
ng
Amountof
Bonds
—
$210,
000
210,
000
210,
000
210,
000
—
$206,
144
205,
758
205,
334
204,
868
—
$3,
856
4,
242
4,
666
5,
132
$2,
061,
440
2,
057,
584
2,
053,
342
2,
048,
676
2,
043,
544
(
c) Car
r
yi
ngamountasof1/
1/
12.
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.
.
Less:Amor
t
i
zat
i
onofbondpr
emi
um
(
5,
132÷2)
.
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Car
r
yi
ngamountasof7/
1/
12.
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$2,
048,
676
Reacqui
si
t
i
onpr
i
ce.
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.
Car
r
yi
ngamountasof7/
1/
12
(
$2,
046,
110÷2)
.
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Loss.
.
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.
$1,
065,
000
1442
2,
566
$2,
046,
110
(
1,
023,
055)
$ 41,
945
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 142(
Cont
i
nued)
Ent
r
yf
oraccr
uedi
nt
er
est
I
nt
er
estExpense(
$204,
868X1/
2X1/
2)
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
5
.
.
1
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.
,
.
2
.
17
BondsPayabl
e.
.
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1
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,
.
2
.
83
Cash(
$210,
000X1/
2X1/
2)
.
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Ent
r
yf
orr
eacqui
si
t
i
on
BondsPayabl
e.
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1
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.
0
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.
2
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3
.
.
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.
0
.
55*
LossonExt
i
ngui
shmentofBonds.
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4
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1
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9
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45
Cash.
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52,
500
1,
065,
000
*
Pr
emi
um asof7/
1/
12t
obewr
i
t
t
enoff
(
$2,
046,
110–$2,
000,
000)X1/
2=$23,
055
Thel
ossi
sr
epor
t
edasot
heri
ncomeandexpense.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1443
lOMoARcPSD|12515046
PROBLEM 143
(
a)
Dat
e
1/
1/
10
4/
1/
10
7/
1/
10
10/
1/
10
1/
1/
11
Cash
Pai
d
—
€400
400
400
400
I
nt
er
est
Expense
—
€640
645
650
655
Di
scount
Amor
t
i
zed
—
€240
245
250
255
Car
r
yi
ng
Amountof
Not
e
€32,
000
32,
240
32,
485
32,
735
32,
990
(
b) Att
hi
spoi
nt
,weseet
hatt
hecust
omerowes€32,
990,or€990mor
e
t
hanatt
hebegi
nni
ngoft
heyear
.
(
c) Toear
n8% overt
henextt
woyear
st
hequar
t
er
l
ypayment
smustbe
€4,
503comput
edasf
ol
l
ows:
€32,
990÷7.
32548(
PVOA8,2%)=€4,
503
(
d)
Dat
e
1/
1/
11
4/
1/
11
7/
1/
11
10/
1/
11
1/
1/
12
4/
1/
12
7/
1/
12
10/
1/
12
1/
1/
13
Cash
Pai
d
—
€4,
503
4,
503
4,
503
4,
503
4,
503
4,
503
4,
503
4,
503
I
nt
er
est
Expense
—
€660
583
505
425
343
260
175
83*
Di
scount
Amor
t
i
zed
—
€3,
843
3,
920
3,
998
4,
078
4,
160
4,
243
4,
328
4,
420
Car
r
yi
ng
Amountof
Not
e
€32,
990
29,
147
25,
227
21,
229
17,
151
12,
991
8,
748
4,
420
0
*
r
oundedup€5
(
e) Thenew sal
esgi
mmi
ckmaybr
i
ngpeopl
ei
nt
ot
heshowr
oom t
hefir
st
t
i
mebutwi
l
ldr
i
vet
hem awayoncet
heyl
ear
noft
heamountoft
hei
r
year2and year3payment
s.Manywi
l
lnothavebudget
ed f
ort
hese
i
ncr
eases,andwi
l
lbei
nabi
ndbecauset
heyowemor
eont
hei
rcart
han
i
t
’
swor
t
h.Oneshoul
dquest
i
ont
heet
hi
csofadeal
erusi
ngt
hi
st
act
i
c.
1444
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 144
DearSamant
ha,
Whenabondi
si
ssuedatf
aceval
ue,t
heannuali
nt
er
estexpenseandt
he
i
nt
er
estpayoutequal
st
hef
aceval
ueoft
hebond t
i
mest
hei
nt
er
estr
at
e
st
at
edoni
t
sf
ace.However
,i
ft
hebondi
si
ssuedt
oyi
el
dahi
gherorl
ower
i
nt
er
estr
at
et
hanwhati
sst
at
edoni
t
sf
ace,t
hei
nt
er
estexpenseandt
he
act
uali
nt
er
estpayoutwi
l
ldi
ffer
.Label
edasadi
scountorpr
emi
um r
espect
i
vel
y,t
hi
sdi
ffer
encei
ni
nt
er
estmustbesyst
emat
i
cal
l
yassoci
at
edwi
t
ht
he
i
nt
er
estper
i
odswhi
choccurovert
hebond’
sl
i
f
et
hr
oughapr
ocesscal
l
ed
amor
t
i
zat
i
on.
Assumeapr
emi
um:t
het
heor
ybehi
ndt
heeffect
i
vei
nt
er
estmet
hodi
st
hat
,
ast
i
mepasses,t
hedi
ffer
encebet
weent
hef
aceval
ueoft
hebondandi
t
s
car
r
yi
ng amountbecomes smal
l
er
,r
esul
t
i
ng i
n al
oweri
nt
er
estexpense
ever
yper
i
od.(
Thecar
r
yi
ngamountequal
st
hef
aceval
ueoft
hebondpl
us
anyunamor
t
i
zedpor
t
i
onoft
hepr
emi
um.
)Becauset
hecar
r
yi
ngamountof
t
hebondbecomessmal
l
erovert
i
me,t
hei
nt
er
estexpenseal
sodoes.Si
nce
t
hest
at
edi
nt
er
estr
at
er
emai
nsconst
ant
,t
her
esul
t
i
ngdi
ffer
encebet
weent
he
act
uali
nt
er
estpayoutandt
hei
nt
er
estexpenser
ecogni
z
edmustber
eflect
ed
wheni
nt
er
estexpensei
sr
ecor
dedf
ort
heper
i
od.
To amor
t
i
zet
hepr
emi
um appl
yi
ng t
hi
smet
hod t
ot
hedat
apr
ovi
ded,you
mustknow t
hebond’
sf
aceamount
,i
t
sst
at
edr
at
eofi
nt
er
est
,i
t
seffect
i
ve
r
at
eofi
nt
er
est
,andi
t
scar
r
yi
ngval
ue.
1. Mul
t
i
pl
yt
he st
at
ed r
at
et
i
mes t
he f
ace amount
.Thi
si
st
he i
nt
er
est
payout
.
2. Mul
t
i
pl
yt
hebond’
scar
r
yi
ng amountbyt
heeffect
i
ver
at
ewhi
ch gi
ves
yout
heact
uali
nt
er
estexpense.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1445
lOMoARcPSD|12515046
PROBLEM 144(
Cont
i
nued)
3. Subt
r
actt
heamountcal
cul
at
edi
n#2abovef
r
om t
hatf
oundi
n#1.Thi
s
i
st
heamountt
obeamor
t
i
zedf
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1447
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
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2
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9
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esPayabl
e.
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2
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,
962.
80
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1449
lOMoARcPSD|12515046
PROBLEM 147
(
a) Ent
r
yt
or
ecor
dt
hei
ssuanceoft
he11% bondsonDecember18,2010:
Cash(
¥40,
000,
000X102%)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
4
.
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0
.
,
.
8
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0
.
.
0
.
.
,
000
BondsPayabl
e.
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.
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.
.
.
.
40,
800,
000
Ent
r
yt
or
ecor
dt
her
et
i
r
ementoft
he9% bondsonJanuar
y2,2011:
BondsPayabl
e(
¥30,
000,
000–¥1,
842,
888)
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2
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8
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1
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7
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,
112
LossonExt
i
ngui
shmentofBonds.
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3
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0
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4
.
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2
.
.
,
888
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000,
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200,
000
[
Thel
ossr
epr
esent
st
heexcessoft
he
cashpai
d(
¥31,
200,
000)overt
he
car
r
yi
ngamountoft
hebonds
(
¥28,
157,
112)
.
]
(
b) Thel
ossi
sr
epor
t
edasanOt
heri
ncomeandexpensei
t
em.
Not
e1.LossonBondExt
i
ngui
shment
Thel
ossr
epr
esent
sal
ossof¥3,
042,
888f
r
om t
heext
i
ngui
shmentand
r
et
i
r
ementof¥30,
000,
000 oft
he Company’
s out
st
andi
ng bond i
ssue
due i
n 2021.The f
unds used t
o pur
chase t
he mor
t
gage bonds
r
epr
esentapor
t
i
on oft
hepr
oceedsf
r
om t
hesal
eof¥40,
000,
000of
11% debent
ur
ebondsi
ssuedDecember18,2010andduei
n2030.
1450
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 148
1.Sanf
or
dCo.
3/
1/
10
Cash.
.
.
.
.
.
.
.
.
.
.
.
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e.
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. 472,
090
*
Pr
esentval
ueof$500,
000duei
n7per
i
odsat6%
(
$500,
000X.
66506)
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esentval
ueofi
nt
er
estpayabl
esemi
annual
l
y
(
$25,
000X5.
58238)
.
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Pr
oceedsf
r
om sal
eofbonds.
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1/
10
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nt
er
estExpense.
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.
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Cash.
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$332,
530
139,
560
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090
3,
325
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000
(
Seeamor
t
i
zat
i
ont
abl
eonnextpage)
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10 I
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estExpense.
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9
.
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,
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0
.
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1
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7
.
.
.
.
BondsPayabl
e
(
$3,
525X4/
6)
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nt
er
estPayabl
e(
$25,
000X4/
6)
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2,
350
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667
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nt
er
estExpense.
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7
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e
(
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525X2/
6)
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175
25,
000
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nt
er
estExpense.
.
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Cash.
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.
.
.
.
3,
736
25,
000
12/
31/
11 I
nt
er
estExpense.
.
.
.
.
.
.
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1
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9
.
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,
.
3
.
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0
.
.
8
.
.
.
.
BondsPayabl
e
(
$3,
961X4/
6)
.
.
.
.
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.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
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.
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.
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.
.
.
.
.
.
.
.
I
nt
er
estPayabl
e.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2,
641
16,
667
9/
1/
11
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1451
lOMoARcPSD|12515046
PROBLEM 148(
Cont
i
nued)
Schedul
eofBondDi
scountAmor
t
i
zat
i
on
Effect
i
veI
nt
er
estMet
hod
10% BondsSol
dt
oYi
el
d12%
Dat
e
3/
1/
10
9/
1/
10
3/
1/
11
9/
1/
11
3/
1/
12
9/
1/
12
3/
1/
13
9/
1/
13
Cash
Pai
d
—
$25,
000
25,
000
25,
000
25,
000
25,
000
25,
000
25,
000
I
nt
er
est
Expense
—
$28,
325
28,
525
28,
736
28,
961
29,
198
29,
450
29,
715*
Di
scount
Amor
t
i
zed
—
$3,
325
3,
525
3,
736
3,
961
4,
198
4,
450
4,
715
Car
r
yi
ng
Amountof
Bonds
$472,
090
475,
415
478,
940
482,
676
486,
637
490,
835
495,
285
500,
000
*
Rounded$2.
2.Ti
t
ani
aCo.
6/
1/
10
Cash.
.
.
.
.
.
.
.
.
.
.
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1452
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 148(
Cont
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ey&Sons
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ForI
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
2,
800
1453
lOMoARcPSD|12515046
PROBLEM 148(
Cont
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nued)
6/
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1454
Copyr
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ght©2011JohnWi
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ey&Sons,I
nc. Ki
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FRS,1/
e,Sol
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ForI
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 149
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lOMoARcPSD|12515046
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
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NOTE:Al
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Copyr
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ForI
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 1410(
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l
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
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ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROBLEM 1414
(
a) Langl
eyCo.
Car
r
yi
ngamountoft
hebondson1/
1/
10.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Effect
i
vei
nt
er
estr
at
e(
10%)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
I
nt
er
estexpenset
ober
epor
t
edf
or2010.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$656,
992
X 0.
10
$ 65,
699
(
b) Tweedi
eBui
l
di
ngCo.
Mat
ur
i
t
i
esand si
nki
ng f
und r
equi
r
ement
son l
ongt
er
m debtf
or
t
henextfiveyearar
easf
ol
l
ows:
2011 $400,
000
2014 $200,
000
2012
350,
000
2015 350,
000
2013
200,
000
(
c) Beckf
or
dI
nc.
Si
ncet
het
hr
eebondsr
epor
t
edbyBeckf
or
dI
nc.ar
esecur
edby
ei
t
herr
ealest
at
e,secur
i
t
i
esofot
hercor
por
at
i
ons,orpl
antequi
pment
,noneoft
hebondsar
ecl
assi
fiedasdebent
ur
ebonds.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1465
lOMoARcPSD|12515046
TI
MEANDPURPOSEOFCONCEPTSFORANALYSI
S
CA141(
Ti
me25–30mi
nut
es)
Pur
pos
e—t
opr
ov
i
det
hes
t
udentwi
t
hs
omef
ami
l
i
ar
i
t
ywi
t
ht
heeconomi
ct
heor
ywhi
c
hr
el
at
est
ot
he
account
i
ngf
orabondi
s
s
ue.Thes
t
udenti
sr
equi
r
edt
odi
s
c
us
st
heconcept
ual
mer
i
t
sf
oreac
hoft
het
hr
ee
di
ffer
ents
t
at
ementoffi
nanc
i
alpos
i
t
i
onpr
es
ent
at
i
onsf
ort
hes
amebondi
s
s
ue,andt
hemer
i
t
sf
orut
i
l
i
z
i
ng
t
henomi
nalr
at
ev
er
s
ust
heeffect
i
v
er
at
eatdat
eofi
s
s
uei
nt
hecomput
at
i
onoft
hecar
r
y
i
ngv
al
ueoft
he
obl
i
gat
i
onsar
i
s
i
ngf
r
om abondi
s
s
ue.
CA142(
Ti
me10–15mi
nut
es)
Pur
pose—t
opr
ovi
det
hest
udentwi
t
hanunder
st
andi
ngoft
hev
ar
i
ousaccount
swhi
char
egener
at
edi
n
abondi
ssueandt
hei
rpr
opercl
assi
ficat
i
onsont
hest
at
ementoffinanci
alposi
t
i
on.Just
i
ficat
i
onmustbe
pr
ovi
dedf
ort
het
r
eat
mentaccor
dedt
heseaccount
si
nr
el
at
i
ont
ot
hespeci
ficsoft
hi
scase.
CA143(
Ti
me15–25mi
nut
es)
Pur
pose—t
hi
scasei
ncl
udesdi
scussi
onsoft
hedet
er
mi
nat
i
onoft
hesel
l
i
ngpr
i
ceofbonds
,pr
esent
at
i
on
ofi
t
emsr
el
at
edt
obondsont
hest
at
ementoffinanc
i
alposi
t
i
onandt
hei
ncomest
at
ement
,whet
her
di
scountamor
t
i
z
at
i
oni
nc
r
eas
esordec
r
eas
es
,andhow anear
l
yr
et
i
r
ementofbondss
houl
dber
epor
t
ed
ont
hei
ncomest
at
ement
.
CA144(
Ti
me20–25mi
nut
es)
Par
tI
—Pur
pose—t
o pr
ovi
de t
he st
udentwi
t
h an under
st
andi
ng oft
he use oft
he effect
i
v
ei
nt
er
est
met
hodofamor
t
i
z
at
i
on.
Par
tI
I
—Pur
pose—t
opr
ovi
det
hest
udentwi
t
hsomef
ami
l
i
ar
i
t
ywi
t
ht
hev
ar
i
ousmet
hodsofaccount
i
ng
f
orgai
nsandl
ossesf
r
om t
heear
l
yext
i
ngui
shmentofdebt
,andt
hej
ust
i
ficat
i
onsf
oreachoft
hedi
ffer
ent
met
hods
.
CA145(
Ti
me20–30mi
nut
es)
Pur
pose—t
hest
udenti
sas
k
edt
oexpl
ai
npr
oj
ectfinanci
ngar
r
angement
s
,t
ak
eor
paycont
r
act
s
,offbal
ancesheetfinanci
ng,andt
hecondi
t
i
onsf
orwhi
c
hacont
r
act
ualobl
i
gat
i
oni
st
obedi
scl
osedasan
uncondi
t
i
onalpur
chaseobl
i
gat
i
on.Thecaseal
sor
equi
r
est
hest
udentt
odet
er
mi
neaccount
i
ngt
r
eat
mentf
orapr
oj
ectfinanci
ngar
r
angement
.
CA146(
Ti
me20–30mi
nut
es)
Pur
pose—t
opr
ovi
det
hest
udentwi
t
hanoppor
t
uni
t
yt
oex
ami
net
heet
hi
cali
ssuesr
el
at
edt
ot
hei
ssue
ofbonds
.
1466
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
SOLUTI
ONSTO CONCEPTSFORANALYSI
S
CA141
(
a) 1.Thi
si
sacommonst
at
ementoffinanci
alposi
t
i
onpr
esent
at
i
onandhast
headv
ant
ageofbei
ng
f
ami
l
i
art
ouser
soffinanci
alst
at
ement
s
.Thet
ot
alof$1,
085,
800i
st
heobj
ect
i
v
el
ydet
er
mi
ned
ex
change pr
i
ce atwhi
ch t
he bonds wer
ei
ssued.I
tr
epr
esent
st
he f
ai
rv
al
ue oft
he bond
obl
i
gat
i
onsgi
v
en.Thus
,t
hi
si
si
nk
eepi
ngwi
t
ht
heusualaccount
i
ngpr
act
i
ceofusi
ngex
change
pr
i
cesasapr
i
mar
ysour
ceofdat
a.
2.Thi
spr
esent
at
i
oni
ndi
cat
est
hedualnat
ur
eoft
hebondobl
i
gat
i
ons
.Ther
ei
sanobl
i
gat
i
ont
o
mak
eper
i
odi
cpayment
sof$55,
000andanobl
i
gat
i
ont
opayt
he$1,
000,
000atmat
ur
i
t
y
.The
amount
spr
esent
edont
hest
at
ementoffinanci
alposi
t
i
onar
et
hepr
esentv
al
uesofeachoft
he
f
ut
ur
eobl
i
gat
i
onsdi
scount
edatt
hei
ni
t
i
aleffect
i
v
er
at
eofi
nt
er
est
.
Thepr
operemphasi
si
spl
acedupont
heaccr
ualconcept
,t
hati
s
,t
hati
nt
er
es
taccr
uest
hr
ough
t
hepassageoft
i
me.Theemphasi
suponpr
emi
umsanddi
scount
si
sel
i
mi
nat
ed.
3.Thi
spr
esent
at
i
onshowst
het
ot
all
i
abi
l
i
t
ywhi
chi
si
ncur
r
edi
nabondi
ssue,buti
ti
gnor
est
he
t
i
mev
al
ueofmoney
.Thi
swoul
dbeaf
ai
rpr
esent
at
i
onoft
hebondobl
i
gat
i
onsonl
yi
ft
he
effect
i
v
ei
nt
er
estr
at
ewer
ez
er
o.
(
b) Whenanent
i
t
yi
ssuesi
nt
er
est
bear
i
ngbonds
,i
tnor
mal
l
yaccept
st
wot
ypesofobl
i
gat
i
ons
:(
1)t
o
payi
nt
er
es
tatr
egul
ari
nt
er
v
al
sand(
2)t
opayt
hepr
i
nci
palatmat
ur
i
t
y
.Thei
nv
est
or
swhopur
chase
Ni
chol
sCompanybondsexpectt
or
ecei
v
e$55,
000eac
hJanuar
y1andJul
y1t
hr
oughJanuar
y1,
2031pl
us$1,
000,
000pr
i
nci
palonJanuar
y1,2031.Si
ncet
hi
s(
$55,
000)i
smor
et
hant
he10% per
annum (
$50,
000semi
annual
l
y)t
hatt
hei
nv
est
or
swoul
dbewi
l
l
i
ngt
oacceptonani
nv
est
mentof
$1,
000,
000i
nt
hesebonds
,t
heyar
ewi
l
l
i
ngt
obi
dupt
hepr
i
ce—t
opayapr
emi
um f
ort
hem.The
amountt
hatt
hei
nv
est
or
sshoul
dbewi
l
l
i
ngt
opayf
ort
hesef
ut
ur
ecashflowsdependsupont
he
i
nt
er
estr
at
et
hatt
heyar
ewi
l
l
i
ngt
oacceptont
hei
ri
nv
est
ment
(
s)i
nt
hi
ssecur
i
t
y
.
Theamountt
hatt
hei
nv
est
or
sar
ewi
l
l
i
ngt
opay(
andt
hei
ssueri
swi
l
l
i
ngt
oaccept
)
,$1,
085,
800,i
s
t
hepr
esentv
al
ueoft
hef
ut
ur
ecashflowsdi
scount
edatt
her
at
eofi
nt
er
es
tt
hatt
heywi
l
laccept
.
Anot
herwayofvi
ewi
ngt
hi
si
st
hatt
he$1,
085,
800i
st
heamountwhi
ch,i
fi
nv
est
edatanannual
i
nt
er
estr
at
e of10% compounded semi
annual
l
y
,woul
d al
l
ow wi
t
hdr
awal
sof$55,
000 ev
er
ysi
x
mont
hsf
r
om Jul
y1,2011t
hr
oughJanuar
y1,2031and$1,
000,
000onJanuar
y1,2031.
Ev
enwhenbondsar
ei
ssuedatt
hei
rmat
ur
i
t
yv
al
ue,t
hepr
i
cepai
dcoi
nci
deswi
t
ht
hemat
ur
i
t
y
v
al
uebecauset
hecouponr
at
ei
sequalt
ot
heeffect
i
v
er
at
e.I
ft
hebondshadbeeni
ssuedatt
hei
r
mat
ur
i
t
yv
al
ue,t
he$1,
000,
000woul
dbet
hepr
esentv
al
ueoff
ut
ur
ei
nt
er
estandpr
i
nci
palpayment
s
di
scount
edatanannualr
at
eof11% compoundedsemi
annual
l
y
.
Her
et
heeffect
i
v
er
at
eofi
nt
er
esti
sl
esst
hant
hecouponr
at
e,sot
hepr
i
ceoft
hebondsi
sgr
eat
er
t
hant
hemat
ur
i
t
yv
al
ue.I
ft
heeffect
i
v
er
at
eofi
nt
er
estwasgr
eat
ert
hant
hecouponr
at
e,t
hebonds
woul
dsel
l
f
orl
esst
hant
hemat
ur
i
t
yv
al
ue.
(
c) 1.Theuseoft
hecouponr
at
ef
ordi
scount
i
ngbondobl
i
gat
i
onswoul
dgi
v
et
hef
acev
al
ueoft
he
bondatJanuar
y1,2011,andatanyi
nt
er
est
paymentdat
et
her
eaf
t
er
.Al
t
hought
hecouponr
at
e
i
sr
eadi
l
yav
ai
l
abl
ewhi
l
et
heeffect
i
v
er
at
emustbecomput
ed,t
hecouponr
at
emaybeset
ar
bi
t
r
ar
i
l
yatt
he di
scr
et
i
on ofmanagementso t
hatt
her
e woul
d be l
i
t
t
l
e orno suppor
tf
or
accept
i
ngi
tast
heappr
opr
i
at
edi
scountr
at
e.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1467
lOMoARcPSD|12515046
CA141(
Cont
i
nued)
2.Theeffect
i
v
ei
nt
er
es
tr
at
eatJanuar
y1,2011i
st
hemar
k
etr
at
et
oNi
chol
sCompanyf
orl
ongt
er
m bor
r
owi
ng.Thi
sr
at
e gi
v
esa di
scount
ed v
al
ue f
ort
he bond obl
i
gat
i
ons
,whi
ch i
st
he
amountt
hatcoul
d be i
nv
est
ed atJanuar
y 1,2011 att
he mar
k
etr
at
e ofi
nt
er
est
.Thi
s
i
nv
est
mentwoul
dpr
ovi
det
hesumsneededt
opayt
her
ecur
r
i
ngi
nt
er
es
tobl
i
gat
i
onpl
ust
he
pr
i
nci
palatmat
ur
i
t
y
.Thus
,t
heeffect
i
v
ei
nt
er
estr
at
ei
sobj
ect
i
v
el
ydet
er
mi
nedandv
er
i
fiabl
e.
Themar
k
etoryi
el
dr
at
eofi
nt
er
estatt
hedat
eofi
ssueshoul
dbeusedt
hr
oughoutt
hel
i
f
eoft
he
bondbecausei
tr
eflect
st
hei
nt
er
estobl
i
gat
i
onwhi
cht
hei
ssueraccept
edatt
het
i
meofi
ssue.
Ther
esul
t
i
ngv
al
ueatt
hedat
eofi
ssuewast
hecur
r
entv
al
ueatt
hatt
i
meandi
ssi
mi
l
art
o
hi
st
or
i
calcost
.Al
so,t
hi
syi
el
dr
at
ei
sobj
ect
i
v
el
ydet
er
mi
nedi
nanex
changet
r
ansact
i
on.
Thecont
i
nueduseoft
hei
ssuedat
eyi
el
dr
at
er
esul
t
si
naf
ai
l
ur
et
or
eflectwhet
hert
hebur
den
i
st
oohi
ghort
ool
ow i
nt
er
msoft
hechangeswhi
c
hmayhav
et
ak
enpl
acei
nt
hei
nt
er
es
tr
at
e.
(
d) Usi
ngacur
r
entyi
el
dr
at
epr
oducesacur
r
entv
al
ue,t
hati
s
,t
heamountwhi
chcoul
dcur
r
ent
l
ybe
i
nv
est
edt
opr
oducet
hedesi
r
edpayment
s
.Whent
hecur
r
entyi
el
dr
at
ei
sl
owert
hant
her
at
eatt
he
i
ssuedat
e(
ort
hanatt
hepr
evi
ousv
al
uat
i
ondat
e)
,t
hel
i
abi
l
i
t
i
esf
orpr
i
nci
palandi
nt
er
estwoul
d
i
ncr
ease.When t
he cur
r
entyi
el
di
shi
ghert
han t
he r
at
e att
he i
ssue dat
e(
oratt
he pr
evi
ous
v
al
uat
i
ondat
e)
,t
hel
i
abi
l
i
t
i
eswoul
ddec
r
eas
e.Thus
,hol
di
nggai
nsandl
os
s
escoul
dbedet
er
mi
ned.I
f
t
hedebti
shel
dunt
i
lmat
ur
i
t
y
,t
het
ot
aloft
hei
nt
er
es
texpenseandt
hehol
di
nggai
nsandl
osses
undert
hi
smet
hodwoul
dequalt
het
ot
ali
nt
er
estexpenseusi
ngt
heyi
el
dr
at
eati
ssuedat
e.
CA142
1. Useoft
heassetr
equi
r
esadepr
eci
at
i
onchar
gei
neachy
earofus
e.Thi
si
nt
ur
nr
equi
r
escar
r
yi
ng
t
heequi
pmentasanasset
.Thecompanyhascont
r
act
edt
opur
chaset
heequi
pmentand,t
hus
,
hasar
eall
i
abi
l
i
t
ywhi
chaffect
sfinanci
alcondi
t
i
onandmustbeshown.
2. Theobl
i
gat
i
onofacompanyi
st
oi
t
sbondhol
der
s
,nott
ot
het
r
ust
ee.Unt
i
lt
hebondhol
der
shav
e
r
ecei
v
edpayment
,t
hecompanyst
i
l
lhasal
i
abi
l
i
t
y
.
(
Not
et
oi
nst
r
uct
or
:The st
udentmayhav
e di
fficul
t
ywi
t
ht
hi
sst
at
ementbecause t
hi
st
ype of
si
t
uat
i
onwasnotdi
scussedi
nt
hechapt
er
.I
tt
her
ef
or
epr
ovi
desanoppor
t
uni
t
yt
oemphasi
z
et
hat
paymentt
oanagentort
r
ust
eedoesnotconst
i
t
ut
epaymentoft
hel
i
abi
l
i
t
yf
orbondi
nt
er
es
t
.When
t
het
r
ust
eedi
spensest
hef
undst
obondhol
der
s
,t
hel
i
abi
l
i
t
yshoul
dber
educed.A separ
at
eBond
I
nt
er
es
tFundaccounti
sest
abl
i
shedatt
het
i
mepaymenti
smadet
ot
het
r
ust
ee.
)
CA143
(
a) 1.Thesel
l
i
ngpr
i
ceoft
hebondswoul
dbet
hepr
esentv
al
ueofal
loft
heexpect
ednetf
ut
ur
ecash
out
flowsdi
scount
edatt
heeffect
i
v
eannuali
nt
er
es
tr
at
e(
yi
el
d)of11per
cent
.Thepr
esentv
al
ue
i
st
hesum oft
hepr
esentv
al
ueofi
t
smat
ur
i
t
yamount(
f
acev
al
ue)pl
ust
hepr
esentv
al
ueoft
he
ser
i
esoff
ut
ur
esemi
annuali
nt
er
es
tpayment
s
.
2.I
mmedi
at
el
yaf
t
ert
hebondi
ssuei
ssol
d,t
hecur
r
entasset
,cash,woul
dbei
ncr
easedbyt
he
pr
oceedsf
r
om t
hesal
eoft
hebondi
ssue.A noncur
r
entl
i
abi
l
i
t
y
,bondspay
abl
e,woul
d be
pr
esent
ed i
nt
he st
at
ementoffinanci
alposi
t
i
on att
he f
ace v
al
ue oft
he bondsnetoft
he
di
scount
.
1468
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
CA143(
Cont
i
nued)
(
b) Thef
ol
l
owi
ngi
t
em r
el
at
edt
ot
hebondi
ssuewoul
dbei
ncl
udedi
nSeal
y’
s2011i
ncomest
at
ement
:
I
nt
er
es
texpensewoul
dbei
ncl
udedf
ort
enmont
hs(
Mar
ch1,2011,t
oDecember31,2011)atan
effect
i
v
ei
nt
er
estr
at
e(
yi
el
d)of11 per
cent
.Thi
si
s composed oft
he nomi
nali
nt
er
es
tof
9per
centadj
ust
edf
ort
heamor
t
i
z
at
i
onoft
her
el
at
edbonddi
scount
.Bonddi
scountshoul
dbe
amor
t
i
z
edusi
ngt
heeffect
i
v
ei
nt
er
estmet
hodov
ert
heper
i
odt
hebondswi
l
lbeout
st
andi
ng,t
hati
s
,
t
heper
i
odf
r
om t
hedat
eofsal
e(
Mar
ch1,2011)t
ot
hemat
ur
i
t
ydat
e(
Mar
ch1,2016)
.
(
c) Theamountofbonddi
scountamor
t
i
z
at
i
onwoul
dbel
oweri
nt
hesecondy
earoft
hel
i
f
eoft
hebond
i
ssue.Theeffect
i
v
ei
nt
er
estmet
hodofamor
t
i
z
at
i
onusesauni
f
or
mi
nt
er
estr
at
ebasedupona
changi
ngcar
r
yi
ngv
al
uewhi
chr
esul
t
si
ni
ncr
easi
ngamor
t
i
z
at
i
oneachy
earwhent
her
ei
sabond
di
scount
.
(
d) Ther
et
i
r
ementoft
hebondswoul
dr
esul
ti
nal
ossf
r
om ext
i
ngui
shmentofdebtt
hatshoul
dbe
i
ncl
udedi
nt
hedet
er
mi
nat
i
onofneti
ncomeandcl
assi
fiedasanOt
heri
ncomeandexpensei
t
em.
CA144
Par
tI
.
Bef
or
et
heeffect
i
v
ei
nt
er
estmet
hodofamor
t
i
z
at
i
oncanbeused,t
heeffect
i
v
eyi
el
dori
nt
er
estr
at
e
oft
hebondmus
tbecomput
ed.Theeffect
i
v
eyi
el
dr
at
ei
st
hei
nt
er
es
tr
at
et
hatwi
l
ldi
scountt
het
wo
component
soft
hedebti
nst
r
umentt
ot
heamountr
ecei
v
edati
ssuance.Thet
wocomponent
si
n
t
hev
al
ueofabondar
et
hepr
esentv
al
ueoft
hepr
i
nci
palamountdueatt
heendoft
hebondt
er
m
andt
hepr
esentv
al
ueoft
heannui
t
yr
epr
esent
edbyt
heper
i
odi
ci
nt
er
estpayment
sdur
i
ngt
hel
i
f
e
oft
hebond.I
nt
er
estexpenseusi
ngt
hei
nt
er
es
tmet
hodi
sbasedupont
heeffect
i
v
eyi
el
dori
nt
er
es
t
r
at
emul
t
i
pl
i
edbyt
hecar
r
yi
ngv
al
ueoft
hebond(
parv
al
ueadj
ust
edf
orunamor
t
i
z
edpr
emi
um or
di
scount
)
.Theamountofamor
t
i
z
at
i
oni
st
hedi
ffer
encebet
weenr
ecogni
z
edi
nt
er
estexpenseand
t
hei
nt
er
estact
ual
l
ypai
d(
parv
al
uemul
t
i
pl
i
edbyt
henomi
nalr
at
e)
.Whenapr
emi
um i
sbei
ng
amor
t
i
z
ed,t
he dol
l
aramountoft
he per
i
odi
c amor
t
i
z
at
i
on wi
l
li
ncr
ease ov
ert
he l
i
f
e oft
he
i
nst
r
ument
.Thi
si
sduet
ot
hedecr
easi
ngcar
r
yi
ngv
al
ueoft
hebondi
nst
r
umentmul
t
i
pl
i
edbyt
he
cons
t
anteffect
i
v
ei
nt
er
es
tr
at
e,whi
c
hi
ss
ubt
r
act
ed f
r
om t
he amountofcas
hi
nt
er
es
tpai
d.I
n
t
hecaseofadi
scount
,t
hedol
l
aramountoft
heper
i
odi
camor
t
i
z
at
i
onwi
l
li
ncr
easeov
ert
hel
i
f
eof
t
hebond.Thi
si
sduet
ot
hei
ncr
easi
ngcar
r
yi
ngv
al
ueoft
hebondi
nst
r
umentmul
t
i
pl
i
edbyt
he
const
anteffect
i
v
ei
nt
er
estr
at
ef
r
om whi
chi
ssubt
r
act
edt
heamountofcashi
nt
er
estpai
d.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1469
lOMoARcPSD|12515046
CA144(
Cont
i
nued)
Par
tI
I
.
(
a) 1.Gai
n orl
osst
o beamor
t
i
zed overt
he r
emai
ni
ng l
i
f
eofol
d debt
.Thebasi
car
gument
suppor
t
i
ngt
hi
smet
hodi
st
hati
fr
ef
undi
ngi
sdonet
oobt
ai
ndebtatal
owercashout
l
ay(
i
nt
er
est
cos
t
)
,t
hent
hegai
norl
ossi
st
r
ul
yacos
tofobt
ai
ni
ngt
her
educt
i
oni
ncashout
l
ay
.Assuch,t
he
new r
at
eofi
nt
er
estal
onedoesnotr
eflectt
hecostoft
henew debt
,butapor
t
i
onoft
hegai
nor
l
ossont
heext
i
ngui
shmentoft
heol
di
nst
r
umentmustbemat
chedwi
t
ht
henomi
nali
nt
er
estt
o
r
eflectt
he t
r
ue cos
tofobt
ai
ni
ng t
he new debti
nst
r
ument
.Thi
s ar
gumentst
at
est
hatt
hi
s
mat
chi
ngmus
tcont
i
nuef
ort
heunexpi
r
edl
i
f
eoft
heol
ddebti
nor
dert
or
eflectt
het
r
uenat
ur
e
oft
het
r
ansact
i
onandcos
tofobt
ai
ni
ngt
henewdebti
nst
r
ument
.
2.Gai
norl
osst
obeamor
t
i
z
edovert
hel
i
f
eoft
henew debti
nst
r
ument
.Thi
sar
guments
t
at
es
t
hatt
hegai
norl
os
sf
r
om ear
l
yex
t
i
ngui
s
hmentofdebtact
ual
l
yaffect
st
hecos
tofobt
ai
ni
nganew
debti
ns
t
r
ument
.Howev
er
,t
hi
smet
hodas
s
er
t
st
hatt
heeffects
houl
dbemat
c
hedwi
t
ht
hei
nt
er
es
t
ex
pens
eoft
henewdebtf
ort
heent
i
r
el
i
f
eoft
henewdebti
ns
t
r
ument
.Thi
sar
gumenti
sbas
edon
t
heas
s
umpt
i
ont
hatt
hedebtwasr
ef
undedt
ot
ak
eadv
ant
ageofnew l
oweri
nt
er
es
tr
at
esort
o
av
oi
dpr
oj
ect
edhi
ghi
nt
er
es
tr
at
esi
nt
hef
ut
ur
eandt
hatanygai
norl
os
sonear
l
yex
t
i
ngui
s
hment
s
houl
dber
efl
ect
edasanel
ementoft
hi
sdec
i
s
i
onandt
ot
ali
nt
er
es
tcos
tov
ert
hel
i
f
eoft
henew
i
ns
t
r
uments
houl
dbes
t
at
edt
or
efl
ectt
hi
sdec
i
s
i
on.
3.Gai
norl
ossr
ecogni
zedi
nt
heper
i
odofext
i
ngui
shment
.Pr
oponent
soft
hi
smet
hodst
at
e
t
hatt
heear
l
yext
i
ngui
shmentofdebtt
ober
ef
undedact
ual
l
ydoesnotdi
fferf
r
om ot
hert
ypesof
ext
i
ngui
shmentofdebtwher
et
he consensusi
st
hatanygai
n orl
ossf
r
om t
he t
r
ansact
i
on
shoul
dber
ecogni
z
edi
nf
ul
li
ncur
r
entnetear
ni
ngs
.Theear
l
yext
i
ngui
shmentoft
hedebti
s
pr
ompt
edf
ort
hesamer
easont
hatot
herdebti
nst
r
ument
sar
eext
i
ngui
shed,namel
y
,t
hatt
he
v
al
ueoft
hedebti
nst
r
umenthaschangedi
nl
i
ghtofcur
r
entfinanci
alci
r
cumst
ancesandear
l
y
ext
i
ngui
shmentoft
hedebtwoul
dpr
oducet
hemos
tf
av
or
abl
er
esul
t
s
.Al
so,i
ti
sar
guedt
hatany
gai
norl
ossont
heext
i
ngui
shmenti
sdi
r
ect
l
yr
el
at
edt
omar
k
eti
nt
er
estfluct
uat
i
onsr
el
at
edt
o
pr
i
orper
i
ods
.I
ft
het
r
uemar
k
eti
nt
er
estr
at
ehadbeenknownatt
het
i
meofi
ssuance,t
her
e
woul
dbenogai
norl
ossatt
het
i
meofext
i
ngui
shment
.Al
so,ev
eni
fmar
k
eti
nt
er
estr
at
eswer
e
notknownbutt
hecar
r
yi
ngv
al
ueoft
hebondwasper
i
odi
cal
l
yadj
ust
edt
omar
k
et
,anygai
nor
l
osswoul
dber
eflect
edatt
hei
nt
er
i
m dat
esandnoti
naf
ut
ur
eper
i
od.Thecal
lpr
emi
um pai
don
ext
i
ngui
shmentand anyunamor
t
i
z
ed pr
emi
um ordi
scountar
e act
ual
l
yadj
ust
ment
st
ot
he
act
ualeffect
i
v
ei
nt
er
estr
at
eov
ert
heout
st
andi
ngl
i
f
eoft
hebond.Assuch,anygai
norl
osson
t
heear
l
yext
i
ngui
shmentofdebti
sr
el
at
edt
opr
i
or
per
i
odv
al
uat
i
ondi
ffer
encesandshoul
dbe
r
ecogni
z
edi
mmedi
at
el
y
.
(
b) Thei
mmedi
at
er
ecogni
t
i
onpr
i
nci
pl
ei
st
heonl
yaccept
abl
emet
hodofr
eflect
i
nggai
nsorl
osseson
t
heear
l
yext
i
ngui
shmentofdebt
,andt
heseamount
s
,i
fmat
er
i
al
,mus
tber
eflect
edasot
heri
ncome
andexpense.
CA145
(
a) Suchfinanci
ngar
r
angement
sar
i
sewhen(
1)t
woormor
eent
i
t
i
esf
or
m anot
herent
i
t
yt
oconst
r
uct
anoper
at
i
ngpl
antt
hatwi
l
lbeusedbybot
hpar
t
i
es;(
2)t
henew ent
i
t
ybor
r
owsf
undst
oconst
r
uct
t
hepr
oj
ectandr
epay
st
hedebtf
r
om t
hepr
oceedsr
ecei
v
edf
r
om t
hepr
oj
ect
;and(
3)paymentof
t
hedebti
sguar
ant
eedbyt
hecompani
est
hatf
or
medt
henewent
i
t
y
.
1470
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
CA145(
Cont
i
nued)
(
b) I
nsomecas
es
,pr
oj
ectfinanci
ngar
r
angement
sbecomemor
ef
or
mal
i
z
edt
hr
ought
heuseoft
ak
eor
paycont
r
act
sors
i
mi
l
art
y
pesofcont
r
act
s
.I
nas
i
mpl
et
ak
eor
paycont
r
act
,apur
c
has
erofgoods
si
gnsanagr
eementwi
t
ht
hes
el
l
ert
opayspeci
fiedamount
sper
i
odi
cal
l
yi
nr
et
ur
nf
orpr
oduct
sor
s
er
v
i
ces
.Thepur
c
has
ermus
tmak
es
pec
i
fi
edmi
ni
mum pay
ment
sev
eni
fdel
i
v
er
yoft
hecont
r
act
ed
pr
oduct
sorser
vi
cesi
snott
ak
en.
(
c) Ry
anshoul
dnotr
ecor
dt
hepl
antasi
t
sasset
.Thepl
anti
st
obeconst
r
uct
edandoper
at
edbyACC.
Al
t
houghRy
anagr
eest
opur
chaseal
loft
hecanspr
oducedbyACC,Ry
andoesnothav
et
he
pr
oper
t
yr
i
ghtt
ot
hepl
ant
,nort
her
i
ghtt
ouset
hepl
ant
.
Account
i
ng f
orpur
chase commi
t
ment
si
s unset
t
l
ed and cont
r
ov
er
si
al
.Some ar
gue t
hatt
hese
cont
r
act
sshoul
dber
epor
t
edasasset
sandl
i
abi
l
i
t
i
esatt
het
i
met
hecont
r
acti
ssi
gned;ot
her
s
bel
i
ev
et
hatourpr
esentr
ecogni
t
i
onatt
hedel
i
v
er
ydat
ei
smostappr
opr
i
at
e.
Not
et
hata pur
chase commi
t
menti
nv
ol
v
es bot
h an i
t
em t
hatmi
ghtbe
r
ecor
dedasanassetandani
t
em t
hatmi
ghtber
ecor
dedasal
i
abi
l
i
t
y
.That
i
s
,i
ti
nv
ol
v
esbot
har
i
ghtt
or
ecei
v
easset
sandanobl
i
gat
i
ont
opay...I
f
bot
ht
her
i
ghtt
or
ecei
v
easset
sandt
heobl
i
gat
i
ont
opaywer
er
ecor
dedat
t
he t
i
me oft
he pur
chase commi
t
ment
,t
he nat
ur
e oft
he l
oss and t
he
v
al
uat
i
onaccountt
hatr
ecor
dsi
twhent
hepr
i
cef
al
l
swoul
dbecl
ear
l
yseen.
Al
t
hough t
he di
scussi
on doesnotex
cl
ude t
he possi
bi
l
i
t
yofr
ecor
di
ng asset
sand l
i
abi
l
i
t
i
esf
or
pur
chasecommi
t
ment
s
,i
tcont
ai
nsnoconcl
usi
onsori
mpl
i
cat
i
onsaboutwhet
hert
heyshoul
dbe
r
ecor
ded.
Accor
di
ng t
o cur
r
entpr
act
i
ce,Ry
an doesnotr
ecor
d an assetr
el
at
i
ng t
ot
he f
ut
ur
e pur
chase
commi
t
ment
.Howev
er
,i
ft
hedol
l
aramounti
nv
ol
v
edi
smat
er
i
al
,t
hedet
ai
l
soft
hecont
r
actshoul
d
bedi
scl
osedi
naf
oot
not
et
ot
hest
at
ementoffinanci
alposi
t
i
on.I
naddi
t
i
on,i
ft
hecont
r
act
edpr
i
ce
i
si
n ex
cessoft
he pur
chase mar
k
etpr
i
ce and i
ti
sexpect
ed t
hatl
osseswi
l
loccurwhen t
he
pur
chasei
seffect
ed,l
ossesshoul
dber
ecogni
z
edi
nt
heaccount
si
nt
heper
i
oddur
i
ngwhi
chsuch
decl
i
nesi
npr
i
cest
ak
epl
ace.
(
d) Offbal
ancesheetfinanci
ngi
sanat
t
emptt
obor
r
ow moni
esi
nsuchawayt
hatt
heobl
i
gat
i
ons
ar
enotr
ecor
dedi
nacompany’
sst
at
ementoffinanci
alposi
t
i
on.Ther
easonsf
oroffbal
ancesheet
financi
ng ar
e many
.Fi
r
st
,many bel
i
ev
et
hatr
emovi
ng debtorot
her
wi
se k
eepi
ng i
tf
r
om t
he
st
at
ementoffinanci
alposi
t
i
on enhancest
he qual
i
t
yoft
he st
at
ementoffinanci
alposi
t
i
on and
per
mi
t
sc
r
edi
tt
obeobt
ai
nedmor
er
eadi
l
yandatl
esscost
.Second,l
oancov
enant
sof
t
eni
mposea
l
i
mi
t
at
i
onont
heamountofdebtacompanymayhav
e.Asar
esul
t
,offbal
ancesheetfinanci
ngi
s
used because t
hese t
ypes ofcommi
t
ment
s mi
ghtnotbe consi
der
ed i
n comput
i
ng t
he debt
l
i
mi
t
at
i
on.Thi
r
d,i
ti
sar
guedbysomet
hatt
heas
setsi
deoft
hest
at
ementoffinanci
alposi
t
i
oni
s
s
ev
er
el
y under
st
at
ed because oft
he use ofcer
t
ai
n account
i
ng met
hods (
l
i
k
e accel
er
at
ed
depr
eci
at
i
onmet
hods)
.Asanoffsett
ot
hesel
owerv
al
ues
,somebel
i
ev
et
hatpar
toft
hedebtdoes
nothav
et
ober
epor
t
ed.
Not
et
oi
nst
r
uct
or
:Addi
t
i
onaldi
scussi
onoft
heset
ypear
r
angement
si
spr
esent
edi
nAppendi
x17B
r
el
at
edt
ov
ar
i
abl
ei
nt
er
estent
i
t
i
es
.
CA146
(
a) Thest
ak
ehol
der
si
nt
heWi
chi
t
acasear
e:
Donal
dLennon,pr
esi
dent
,f
ounder
,andmaj
or
i
t
yshar
ehol
der
.
Ni
naFr
i
endl
y
,mi
nor
i
t
yshar
ehol
der
.
Ot
hermi
nor
i
t
yshar
ehol
der
s
.
Exi
st
i
ngcr
edi
t
or
s(
debthol
der
s)
.
Fut
ur
ebondhol
der
s
.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
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y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1471
lOMoARcPSD|12515046
Empl
oy
ees
,suppl
i
er
s
,andcust
omer
s
.
1472
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
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uct
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
CA146(
Cont
i
nued)
(
b) Theet
hi
cali
ssues
:
The desi
r
es oft
he maj
or
i
t
y shar
ehol
der(
Donal
d Lennon)v
er
sus t
he desi
r
es oft
he mi
nor
i
t
y
shar
ehol
der
s(
Ni
naFr
i
endl
yandot
her
s)
.
Doi
ngwhati
sr
i
ghtf
ort
hecompanyandot
her
sv
er
s
usdoi
ngwhati
sbes
tf
oronesel
f
.
Quest
i
ons
:
I
swhatDonal
dwant
st
odol
egal
?I
si
tunet
hi
cal
?I
sDonal
d’
sact
i
onbr
ashandi
r
r
esponsi
bl
e
?Who
maybenefit
/
sufferi
fDonal
d ar
r
angesa hi
ghr
i
skbond i
ssue
? Who maybenefit
/
sufferi
fNi
na
Fr
i
endl
ygai
nscont
r
olofWi
chi
t
a?
(
c) Ther
at
i
onal
epr
ovi
dedbyt
hest
udentwi
l
lbemor
ei
mpor
t
antt
hant
hespeci
ficposi
t
i
onbecauset
hi
s
i
sabor
der
l
i
necasewi
t
hnor
i
ghtans
wer
.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1473
lOMoARcPSD|12515046
FI
NANCI
ALREPORTI
NG PROBLEM
(
a) Accor
di
ngt
ot
hemat
ur
i
t
yofbor
r
owi
ngsnot
e(
Not
e21)
,t
i
mi
ngofcash
flowsar
e:
Wi
t
hi
noneyear
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. £1,
046.
6
Bet
weenoneandt
woyear
s.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
203.
7
Bet
weent
woandfiveyear
s.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,
330.
8
Mor
et
han£5year
s.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. 2,
800.
4
£5,
381.
5
(
b) (
Amount
si
n£mi
l
l
i
ons)
1. Wor
ki
ngcapi
t
al=Cur
r
entasset
sl
esscur
r
entl
i
abi
l
i
t
i
es.
(
£807.
2)=£1,
181.
7–£1,
988.
9
2. Aci
dt
estr
at
i
o=
.
35t
i
mes=
3.
Cur
r
entr
at
i
o=
.
59t
i
mes=
Cash+shor
t
t
er
mi
nvest
ment
s+netr
ecei
vabl
es
Cur
r
entl
i
abi
l
i
t
i
es
£318.
0+£307.
6+£48.
8+£18.
4
£1,
988.
9
Cur
r
entasset
s
Cur
r
entl
i
abi
l
i
t
i
es
£1,
181.
7
£1,
988.
9
M&Shasaf
ai
r
l
yweakl
i
qui
di
t
yposi
t
i
on.Thecur
r
entr
at
i
oi
sbel
ow 1.
Theaci
dt
estr
at
i
oi
ssi
gni
ficant
l
ybel
ow 1,possi
bl
yduet
oasl
owi
ng
economy.
1474
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
FI
NANCI
ALREPORTI
NG PROBLEM (
Cont
i
nued)
The ot
herr
at
i
o anal
ysi
s bel
ow cor
r
obor
at
es M&S’
sr
el
at
i
vel
y weak
financi
alposi
t
i
oni
n2008.
Recei
vabl
est
ur
nover=
=
Netsal
es
Aver
ager
ecei
vabl
es
£9,
022.
0
£196.
7+£307.
6
2
= 35.
78t
i
mes
I
nvent
or
yt
ur
nover=
=
Costofgoodssol
d
Aver
agei
nvent
or
y
£5,
535.
2
£416.
3+£488.
9
2
= 12.
23t
i
mes
ovi
dedbyoper
at
i
ngact
i
vi
t
i
es
Cur
r
entcashdebt Netcashpr
=
cover
ager
at
i
o
Aver
agecur
r
entl
i
abi
l
i
t
i
es
=
£1,
069.
8
£1,
606.
2+£1,
988.
9
2
=.
60t
i
mes
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1475
lOMoARcPSD|12515046
FI
NANCI
ALREPORTI
NG PROBLEM (
Cont
i
nued)
ovi
dedbyoper
at
i
ngact
i
vi
t
i
es
Cashdebtcover
ager
at
i
o= Netcashpr
Aver
aget
ot
all
i
abi
l
i
t
i
es
=
£1,
069.
8
£3,
732.
8+£5,
197.
0
2
= .
24t
i
mes
Debtt
ot
ot
alasset
s=
£5,
197.
0
=.
73
£7,
161.
0
ncomebef
or
ei
ncomet
axesandi
nt
er
este
xpense
Ti
mei
nt
er
estear
ned= I
I
nt
er
estexpense
0+£308.
1+£146.
6
= £821.
£146.
6
= 8.
70t
i
mes
Si
mi
l
art
oM&S’
sl
i
qui
di
t
yposi
t
i
on,t
hecompany’
ssol
vencyal
soappear
s
weak.I
thas l
ow cover
age ofi
t
s cur
r
entand noncur
r
entl
i
abi
l
i
t
i
es.
However
,i
t
si
nt
er
estcover
ageappear
sadequat
e.I
ndust
r
yand year
t
oyearcompar
i
sonsshoul
dal
sobeempl
oyed.
I
n summar
y,t
heanal
ysi
sofl
i
qui
di
t
yand sol
vencyi
ssuggest
i
veof
weakened financi
alflexi
bi
l
i
t
y.I
ti
sl
i
kel
yt
hatmany compani
es ar
e
exper
i
enci
ng si
mi
l
archal
l
enges i
nt
he wake oft
he r
ecentgener
al
economi
cdownt
ur
n.
1476
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
COMPARATI
VEANALYSI
SCASE
(
a) Debtt
ot
ot
alasset
sr
at
i
o:
Cadbur
y
£5,
361/
£8,
895=60.
3%
Nest
l
é
CHF51,
299/
CHF106,
215=48.
3%
Ti
mesi
nt
er
estear
nedr
at
i
o:
Cadbur
y
(
£366+£30+£50)
/£50=8.
92t
i
mes
Nest
l
é
(
CHF19,
051+CHF3,
787
+CHF1,
247)
/
CHF1,
247=19.
3t
i
mes
Thedebtt
ot
ot
alasset
sr
at
i
osofover48% f
orbot
hCadbur
yandNest
l
é
show bot
h compani
est
o behi
ghl
yl
ever
aged,Cadbur
ymor
eso t
han
Nest
l
é.Thet
i
mesi
nt
er
estear
nedr
at
i
osshow t
hati
nt
er
estexpensei
s
qui
t
eadequat
el
ycover
edbyt
hefir
ms’neti
ncome;Nest
l
écover
agei
s
mor
et
hangood;i
ti
ssuper
b,especi
al
l
yconsi
der
i
ngt
hedebtt
ot
ot
al
asset
sr
at
i
oof48%.
(
b)
Cadbur
y
Nest
l
é
Car
r
yi
ngVal
ue
Fai
rVal
ue
£2,
385
N/
A
£2,
387
N/
A
Thef
ai
rval
uewi
l
lvar
yf
r
om t
hehi
st
or
i
calcostcar
r
yi
ngval
ueduet
o
changesi
ni
nt
er
estr
at
es.
(
c) Bot
hCadbur
yandNest
l
éhavedebti
ssuedi
nf
or
ei
gncount
r
i
es.These
compani
esmayusef
or
ei
gndebtbecause
1. Loweri
nt
er
estr
at
esmaybeavai
l
abl
ei
nf
or
ei
gncount
r
i
es.
2. Cr
edi
tmaybemor
er
eadi
l
yavai
l
abl
ei
nf
or
ei
gncount
r
i
es.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1477
lOMoARcPSD|12515046
COMPARATI
VEANALYSI
SCASE(
Cont
i
nued)
Usi
ng f
or
ei
gn debtt
o finance oper
at
i
ons i
s subj
ectt
ot
he r
i
sk of
f
or
ei
gncur
r
encyexchanger
at
efluct
uat
i
ons.Bot
hCadbur
yandNest
l
é
ent
eri
nt
oi
nt
er
estr
at
e and f
or
ei
gn cur
r
ency swaps t
o effect
i
vel
y
changet
hei
nt
er
estr
at
eandcur
r
encyofspeci
ficdebti
ssuances.These
swapsar
egener
al
l
yent
er
ed i
nt
o concur
r
ent
l
ywi
t
ht
hei
ssuanceof
t
hedebtt
heyar
ei
nt
endedt
omodi
f
y.
1478
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
FI
NANCI
ALSTATEMENTANALYSI
SCASE1
COMMONWEALTHEDI
SONCO.
(
a) Due t
ot
he mar
kdown f
r
om 99.
803 t
o 99.
25,Commonweal
t
h Edi
son
woul
dr
ecor
d asl
i
ght
l
yl
ar
gerdi
scountand,ofcour
se,r
ecei
veand
r
ecor
dl
esscash.Amor
t
i
zat
i
on oft
hel
ar
gerdi
scountwi
l
lr
esul
ti
n
al
ar
geri
nt
er
estexpensechar
gei
neachyeart
hebondsar
eout
st
andi
ng.
As a r
esul
toft
he addi
t
i
onal$5.
50 mar
kdown,t
he effect
i
vei
nt
er
est
r
at
ei
ncr
easedf
r
om 9.
3% t
o9.
45%.
(
b) I
nt
hesameWal
lSt
r
eetJour
nalar
t
i
cl
e,t
hef
ol
l
owi
ngexpl
anat
i
onwas
pr
ovi
dedf
orCommonweal
t
hEdi
son’
sbondmar
kdownandsl
ow sal
e:
“Commonweal
t
h had t
he mi
sf
or
t
une t
o begi
ni
t
s gi
ant
offer
i
ngonl
yhour
sbef
or
ei
nvest
orsent
i
mentwassour
ed
by t
he r
epor
tl
astThur
sday ofa r
ecor
di
ncr
ease i
nt
he
nat
i
on’
smoneysuppl
y.Themonet
ar
ysur
ge,pl
usar
ecent
r
ebound i
ni
ndust
r
i
alpr
oduct
i
vi
t
yr
epor
t
ed Fr
i
day,hal
t
ed
t
he mar
ketr
al
l
yt
r
i
gger
ed i
n ear
l
y May by si
gns ofan
economi
csl
owdownandapeaki
ngofi
nt
er
estr
at
es.
”
Ot
hereconomi
cevent
st
hatcananddoaffectt
hepr
i
ceofsecur
i
t
i
es
i
ssuedar
e:
1. Achangei
nt
heFeder
alReser
ve’
sl
endi
ngr
at
e.
2. Achangei
nt
hebankpr
i
mer
at
e.
3. Afloodofot
hersi
mi
l
arsecur
i
t
i
esi
ssues.
4. Agoodorpoorear
ni
ngsr
epor
tf
ort
hei
ssuer
.
5. Achangei
nt
hei
ssuer
’
scr
edi
tr
at
i
ng.
6. The i
ssuance ofa f
avor
abl
e orunf
avor
abl
e br
oker
’
s orot
her
financi
alanal
ysi
s.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
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nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1479
lOMoARcPSD|12515046
FI
NANCI
ALSTATEMENTANALYSI
SCASE1(
Cont
i
nued)
Ofcour
se,noneconomi
c,pol
i
t
i
cal
,orot
herwor
l
devent
scanal
soaffect
t
hedayt
odaysal
eofsecur
i
t
i
es.
The “r
ecentr
ebound i
ni
ndust
r
i
alpr
oduct
i
vi
t
y” ment
i
oned i
nt
he
ar
t
i
cl
ewoul
dnor
mal
l
ynotbeadepr
essantonasecur
i
t
i
esi
ssue;but
becauset
hefinanci
alcommuni
t
ywasant
i
ci
pat
i
ng,evenhopi
ngf
or
,
ar
ecessi
ont
o“
coolofft
heeconomy”and,t
hus,l
owert
het
henexi
st
i
ng
hi
ghi
nt
er
estr
at
es,t
her
eboundr
epr
esent
edadel
ayi
nt
her
ecessi
on
andt
hel
ower
i
ngofi
nt
er
estr
at
es.
1480
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
FI
NANCI
ALSTATEMENTANALYSI
SCASE2
PEPSI
CO
(
a) Answer
s wi
l
lvar
y.The company may have deci
ded t
or
efinance i
n
or
dert
of
r
eecashneededf
orsomeot
herpur
pose,t
or
educecur
r
ent
cashneeds,ort
ol
eaveacr
edi
tl
i
neavai
l
abl
ef
orqui
ckaccess.
(
b) Thei
nvest
orpr
obabl
yenj
oysahi
gheri
nt
er
estr
at
et
hant
hatobt
ai
ned
f
r
om ot
her t
ypes ofbonds.Al
so,a smal
l
er i
ni
t
i
ali
nvest
menti
s
r
equi
r
ed.
BondsPayabl
e.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
7
.
.
8
.
.
0
.
.
,
.
0
.
.
0
.
.
0
.
.
,
.
0
.
.
0
.
0
Cash.
.
.
.
.
.
.
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780,
000,
000
Thi
sbondwoul
dbel
i
st
edi
ncur
r
entl
i
abi
l
i
t
i
esi
nt
heyearpr
i
ort
ot
he
yearofpayment
.
(
c)
Cash[
(
$250,
000,
000X1.
02)+
(
$95,
000,
000X.
99)
]
.
.
.
.
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3
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4
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9
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.
,
.
0
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.
5
.
.
0
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.
,
.
0
.
.
0
.
0
BondsPayabl
e.
.
.
.
.
.
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.
. 349,
050,
000
ORt
het
wobondscoul
dbeshownsepar
at
el
y:
Cash.
.
.
.
.
.
.
.
.
.
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2
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5
.
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5
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.
,
.
0
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.
0
.
.
0
.
.
,
.
0
.
.
0
.
0
BondsPayabl
e.
.
.
.
.
.
.
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.
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.
.
.
.
.
.
. 255,
000,
000
and
Cash.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
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.
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.
9
.
.
4
.
.
,
.
0
.
.
5
.
.
0
.
.
,
.
0
.
.
0
.
0
BondsPayabl
e.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
.
.
.
.
94,
050,
000
Possi
bl
er
easonsf
ort
hedi
ffer
encecoul
dbet
hatt
hest
at
edi
nt
er
est
r
at
eont
heAust
r
al
i
anbondwasver
yat
t
r
act
i
vet
oAust
r
al
i
ani
nvest
or
s,
t
her
ef
or
ei
tsol
datapr
emi
um;andt
hei
nt
er
estr
at
eont
heI
t
al
i
anbond
wasunat
t
r
act
i
vet
oI
t
al
i
ani
nvest
or
s,soi
tsol
datadi
scount
.
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1481
lOMoARcPSD|12515046
FI
NANCI
ALSTATEMENTANALYSI
SCASE2(
Cont
i
nued)
(
d) Answer
swi
l
lvar
y.Oneadvant
agewoul
d bet
hati
ti
sabond whose
pr
i
nci
palmaynotneedt
obepai
di
nt
hef
or
eseeabl
ef
ut
ur
e.
Cur
r
entPor
t
i
onofNonCur
r
entDebt
NonCur
r
entDebt
100,
000,
000
100,
000,
000
Noj
our
nalent
r
yi
snecessar
yt
or
ecor
dt
hechangei
ni
nt
er
estr
at
e.
1482
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
ACCOUNTI
NG,ANAL
YSI
S,ANDPRI
NCI
PLES
ACCOUNTI
NG
Bondcal
cul
at
i
ons:
PVofbondsati
ssuance=(
€1,
500XPVF10,6)+(
€1,
500X0.
05XPVF–OA10,6)
=(
€1,
500)
(
0.
55839)+(
€1,
500)
(
0.
05)
(
7.
36009)
=€837.
59+€552.
01
=€1,
389.
60
I
nt
er
estexpensef
or6mont
hsendi
ng06/
30/
11=(
€1,
426X0.
06)=€85.
56
I
nt
er
estpai
dwi
t
hcash=(
€1,
500X0.
05)=€75.
00
St
at
ementoffinanci
alposi
t
i
onval
ueat06/
30/
11=€1,
426+€85.
56–€75.
00
=€1,
436.
56
I
nt
er
estexpensef
or6mont
hsendi
ng12/
31/
11=(
€1,
436.
56X0.
06)=€86.
19
I
nt
er
estpai
dwi
t
hcash=€75.
00
St
at
ementoffinanci
alposi
t
i
onval
ueat12/
31/
11=€1,
436.
56+€86.
19–
€75.
00=€1,
447.
75
BUGANT,I
NC.
I
NCOMESTATEMENT
f
ort
heyear
edended12/
31/
11
Sal
es
Expenses:
COGS
Sal
ar
yExpense
Depr
eci
at
i
onExpense
I
nt
er
estExpense
NetI
ncome
€2,
922
1,
900
700
80
172
2,
852
€
70
I
ncomest
at
ementcal
cul
at
i
ons:
COGS=€1,
800+€2,
000–€1,
900=€1,
900
Depr
eci
at
i
onexpense=€2,
000÷25=€80
I
nt
er
estexpense=€85.
56+€86.
19=€171.
75
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1483
lOMoARcPSD|12515046
ACCOUNTI
NG,ANALYSI
S,ANDPRI
NCI
PLES(
Cont
i
nued)
BUGANT,I
NC.
STATEMENTOFFI
NANCI
ALPOSI
TI
ON
DECEMBER31
2011
2010
2011
Asset
s
Equi
t
y
Pl
ant
,andequi
p. €2,
000 €2,
000 Shar
ecapi
t
al
€1,
500
Accumul
at
eddep. (
240)
(
160) Ret
ai
nedear
ni
ngs 1,
134
I
nvent
or
y
1,
900
1,
800 Li
abi
l
i
t
i
es
Cash
422
450 Bondspayabl
e
1,
448
Tot
alAsset
s
€4,
082 €4,
090 Tot
alequi
t
y&
l
i
abi
l
i
t
i
es
€4,
082
2010
€1,
500
1,
164
1,
426
€4,
090
St
at
ementoffinanci
alposi
t
i
oncal
cul
at
i
ons:
Cash=€450+€2,
922–€2,
000–€700–€100–€75–€75=€422
Accumul
at
eddepr
eci
at
i
on=€160+€80=€240
Ret
ai
nedear
ni
ngs=€1,
164+€70–€100=€1,
134
ANALYSI
S
Debt
t
oassetr
at
i
o:
2010:€1,
426÷€4,
090=0.
3487or34.
87per
centofBugant
’
sasset
swer
e
financedwi
t
hdebt
.
2011:€1,
448÷€4,
082=0.
3547or35.
47per
cent
.
Ti
mesi
nt
er
estear
nedr
at
i
o:
2010:(
€550+€169)÷€169=4.
25
2011:(
€70+€172)÷€172=1.
41
Lesst
hanhal
fofBugant
’
sfinanci
ngcomesf
r
om debt
,whi
chi
sr
el
at
i
vel
y
l
ow.I
n2010,Bugantear
nedf
our
andaquar
t
ert
i
mesi
t
si
nt
er
estexpense.
However
,i
n2011,t
hecompany’
sear
ni
ngsf
el
lconsi
der
abl
yandi
ti
snow
bar
el
ycover
i
ngi
t
si
nt
er
estchar
ges.Thi
swoul
dbecausef
orconsi
der
abl
e
concer
n.I
fi
ncomecont
i
nuest
osl
i
de,t
hecompanywi
l
ll
i
kel
yhavet
r
oubl
e
meet
i
ngi
t
si
nt
er
estpayment
s.
1484
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1485
lOMoARcPSD|12515046
ACCOUNTI
NG,ANALYSI
S,ANDPRI
NCI
PLES(
Cont
i
nued)
Not
et
hati
nt
er
estexpense i
nt
hi
s pr
obl
em i
sl
ar
gert
han t
he company’
s
year
l
y cash i
nt
er
estpayment
s.Cash payment
sf
ori
nt
er
estar
e €150 per
year
.Thus,onemi
ghtar
guet
het
i
mesi
nt
er
estear
ned r
at
i
o‘
under
st
at
es’
t
hecompany’
sabi
l
i
t
yt
omakei
nt
er
estpayment
s.Essent
i
al
l
y,t
hecompany
i
sdel
ayi
ngt
hepaymentofsomeoft
hei
nt
er
esteachyearunt
i
lt
hebond’
s
mat
ur
i
t
ydat
e.Wi
t
ht
hecompany’
scur
r
entcashbal
anceandl
ow i
ncome,
onewoul
dhavet
oquest
i
ont
hecompany’
sabi
l
i
t
yt
omeeti
t
sobl
i
gat
i
onon
t
hemat
ur
i
t
ydat
ewheni
tar
r
i
ves.
PRI
NCI
PLES
Onecoul
dar
guet
hatt
hi
sr
epr
esent
sacl
assi
ct
r
adeoffbet
weenr
el
evance
and f
ai
t
hf
ulr
epr
esent
at
i
on.Many peopl
et
hi
nk t
hatt
he f
ai
r val
ues of
compani
es’asset
s and l
i
abi
l
i
t
i
es ar
er
el
evantt
o maki
ng i
nvest
i
ng and
financi
ng deci
si
ons. However
,t
he det
er
mi
nat
i
on of f
ai
r val
ue i
st
he
r
esponsi
bi
l
i
t
yofmanagement
.Managementmayhavei
ncent
i
vest
o‘
skew’
r
epor
t
edf
ai
rval
uenumber
sonedi
r
ect
i
onort
heot
her
.Forexampl
e,i
nt
hi
s
case,changesi
nt
hef
ai
rval
ueofdebtwoul
d bepar
toft
heper
i
od’
snet
i
ncome.Thus,managementmayhaveani
ncent
i
vet
obi
ast
hei
rest
i
mat
eof
t
hef
ai
rval
uesoft
hei
rdebt
.
Ont
heot
herhand,onemi
ghtar
guet
hatf
ai
rval
uesofdebtar
enotr
eal
l
y
r
el
evanti
ft
hecompanywi
l
lnotpayofft
hedebtear
l
y.
1486
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROFESSI
ONALRESEARCH
Accor
di
ngt
oI
AS39:
(
a) I
ni
t
i
almeasur
ementoffinanci
alasset
sandfinanci
all
i
abi
l
i
t
i
es
Whenafinanci
alassetorfinanci
all
i
abi
l
i
t
yi
sr
ecogni
sedi
ni
t
i
al
l
y,an
ent
i
t
yshal
lmeasur
ei
tati
t
sf
ai
rval
uepl
us,i
nt
hecaseofafinanci
al
assetorfinanci
all
i
abi
l
i
t
y notatf
ai
rval
ue t
hr
ough pr
ofitorl
oss,
t
r
ansact
i
on cost
st
hatar
e di
r
ect
l
y at
t
r
i
but
abl
et
ot
he acqui
si
t
i
on or
i
ssueoft
hefinanci
alassetorfinanci
all
i
abi
l
i
t
y.(
par
a.43)
(
b) Der
ecogni
t
i
onofafinanci
all
i
abi
l
i
t
y
An ent
i
t
y shal
lr
emove a financi
all
i
abi
l
i
t
y(
ora par
tofa financi
al
l
i
abi
l
i
t
y)f
r
om i
t
sst
at
ementoffinanci
alposi
t
i
onwhen,andonl
ywhen,
i
ti
sext
i
ngui
shed—i
ewhent
heobl
i
gat
i
onspeci
fiedi
nt
hecont
r
acti
s
di
schar
gedorcancel
l
edorexpi
r
es.(
par
a.39)
An exchange bet
ween an exi
st
i
ng bor
r
ower and l
ender of debt
i
nst
r
ument
swi
t
hsubst
ant
i
al
l
ydi
ffer
entt
er
msshal
lbeaccount
edf
or
as an ext
i
ngui
shment of t
he or
i
gi
nal financi
al l
i
abi
l
i
t
y and t
he
r
ecogni
t
i
on of a new financi
al l
i
abi
l
i
t
y. Si
mi
l
ar
l
y, a subst
ant
i
al
modi
ficat
i
onoft
het
er
msofanexi
st
i
ngfinanci
all
i
abi
l
i
t
yorapar
tofi
t
(
whet
herornotat
t
r
i
but
abl
et
ot
hefinanci
aldi
fficul
t
y oft
hedebt
or
)
shal
lbeaccount
edf
orasanext
i
ngui
shmentoft
heor
i
gi
nalfinanci
al
l
i
abi
l
i
t
yandt
her
ecogni
t
i
onofanew financi
all
i
abi
l
i
t
y.(
par
a.40)
Thedi
ffer
encebet
weent
hecar
r
yi
ngamountofafinanci
all
i
abi
l
i
t
y(
or
par
tofa financi
all
i
abi
l
i
t
y)ext
i
ngui
shed ort
r
ansf
er
r
ed t
o anot
her
par
t
y and t
he consi
der
at
i
on pai
d,i
ncl
udi
ng any noncash asset
s
t
r
ansf
er
r
edorl
i
abi
l
i
t
i
esassumed,shal
lber
ecogni
sedi
npr
ofitorl
oss.
(
par
a.41)
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
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onsManual (
ForI
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Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1487
lOMoARcPSD|12515046
PROFESSI
ONALSI
MULATI
ON
Jour
nalEnt
r
i
es
Apr
i
l1,2009
Cash.
.
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.
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927,
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379,
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ffer
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oundi
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nt
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es.
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i
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nt
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530,
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19,
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00
Resour
ces
1488
Copyr
i
ght©2011JohnWi
l
ey&Sons,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
lOMoARcPSD|12515046
PROFESSI
ONALSI
MULATI
ON(
Cont
i
nued)
Fi
nanci
alSt
at
ement
s
BALZACI
NC.
St
at
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nanci
alPosi
t
i
onasofMar
ch31,2010
Noncur
r
entl
i
abi
l
i
t
i
es
11% bondspayabl
e(
Not
eA)
.
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.
.
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lf
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ur
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i
l1,2019.
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abi
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t
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esi
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ur
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ongt
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m not
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emat
ur
easf
ol
l
ows.
DueDat
e
AmountDue
Apr
i
l1,2011–Mar
ch31,2012
Apr
i
l1,2012–Mar
ch31,2013
$600,
000
500,
000
Copyr
i
ght©2011JohnWi
l
ey&Sons
,I
nc. Ki
eso,I
FRS,1/
e,Sol
ut
i
onsManual (
ForI
nst
r
uct
orUseOnl
y)
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)
1489
lOMoARcPSD|12515046
Downloaded by ?ào Huy?n Trang 4KT-20ACN (2004010104@s.hanu.edu.vn)