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14 September, 07:22

Exercise 14-5 (Algo) Bonds; issuance; effective interest; financial statement effects [LO14-2] Myriad Solutions, Inc. issued 12% bonds, dated January 1, with a face amount of $390 million on January 1, 2021, for $348,683,634. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity the market yield is 14%. Interest is paid semiannually on June 30 and December 31. Required: Calculate the amounts related to the bonds that Myriad would report in its financial statements. (Round your answers to the nearest whole dollar.)

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  1. 14 September, 07:25
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    1a. Carrying value $354,266,807

    Interest expense $52,383,173

    Cash Interest $46,800,000

    1b. Balance Sheet:

    Net Liability $354,266,807

    Income Statement:

    Interest expense $52,383,173

    Statement of cash flows:

    Operating - $46,800,000

    Investing 0

    Financing $348,683,634

    Explanation:

    1a. Calculation of the amounts related to the bonds that Myriad would report in its financial statements

    Bond Amortization Schedule

    Date Cash interest Interest Expense Discount amortization Carrying value

    01-Jan-21 $348,683,634

    30-Jun-21

    $23,400,000 $24,407,854 $1,007,854 $349,691,488

    31-Dec-21 $23,400,000 $27,975,319 $4,575,319 $354,266,807

    Total amount of Cash Interest

    $46,800,000

    Total amount of Interest expense $52,383,173

    1b. Indication of the amounts to be reported on the financial statements for the year ending December 31, 2021

    Myriad Financial statements

    Balance Sheet:

    Net Liability $354,266,807

    Income Statement:

    Interest expense $52,383,173

    Statement of cash flows:

    Operating - $46,800,000

    Investing 0

    Financing $348,683,634

    ($354,266,807+$46,800,000)

    =$401,066,807

    $401,066,807-$52,383,173

    =$348,683,634
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