PROBLEM 1

A 1 Issue price of BP 2,625,000

BP w/out conversion price (2,350,000)
Share premium-conv priv 275,000

Jan 1 Cash 2,625,000

Discount on Amortization 150,000
Bond Payable 2,500,000
Share Premium - conv priv 275,000

2 Date IE IP
Jan 1, 2014
Dec 31, 2014 329,000 300,000

Dec 31 Interest Expense 329,000

Discount on Amortization 29,000
Cash 300,000

31 Bond Payable 2,500,000

Share Premium - conv priv 275,000
Discount on Amortization 121,000
Ordinary Share Capital 2,500,000
Ordinary Share Premium 154,000

3 Bonds payable (5 yrs, 12%, semi) 4,000,000

Share warrants 8000, P100-par for P150
Issued at 120

FV of BP & Warrants (4M * 1.20) 4,800,000

CV of Bonds Payable (4,292,800)
Share warrants outstanding 507,200

4 Date IE IP
Jan 1, 2014
June 31, 2014 214,640 240,000
Dec 31, 2014 213,372 240,000

5 Cash 1,200,000
Share warrants outstanding 507,200
Ordinary Share Capital 800,000
Ordinary Share Premium 907,200
Amortization Discount on BP CV of BP
150,000 2,350,000
29,000 121,000 2,379,000

Amortization Premium on BP CV of BP
292,800 4,292,800
25,360 267,440 4,267,440
26,628 240,812 4,240,812
51,988
A 1 PV of Principal 3,118,000
PV of Interest 5,734,960
PV of BP 8,852,960

A 2 Interest on BP 250,000
Notes Payable
Apr 1, 2014 400,000
July 1, 2014 600,000
Oct 1, 2014 300,000
Jan 1, 2015 300,000 1,600,000
Interest on NP 600,000
Estimated warranties 342,000
Trade payables 740,000
Payroll related items 404,000
Miscellaneous accruals 150,000
Cash Dividends 1,200,000
Total current liabilities 5,286,000

C 3 Bond Payable 8,970,784

Notes Payable 5,400,000
Total noncurrent liabilities 14,370,784

Date IE IP Amortization
July 1, 2012
Jan 1, 2013 531,178 500,000 31,178
July 1, 2013 533,048 500,000 33,048
Jan 1, 2014 535,031 500,000 35,031
Mar 31,2014 268,567 250,000 18,567
July 1, 2014 268,567 250,000 18,567
Jan 1, 2015 539,361 500,000 39,361
July 1, 2015 541,723 500,000 41,723
Jan 1, 2016 544,226 500,000 44,226
July 1, 2016 546,880 500,000 46,880
Jan 1, 2017 549,692 500,000 49,692
July 1, 2017 552,674 500,000 52,674
Jan 1, 2018 555,834 500,000 55,834
July 1, 2018 559,184 500,000 59,184
Jan 1, 2019 562,735 500,000 62,735
July 1, 2019 566,500 500,000 66,500
Jan 1, 2020 570,490 500,000 70,490
July 1, 2020 574,719 500,000 74,719
Jan 1, 2021 579,202 500,000 79,202
July 1, 2021 583,954 500,000 83,954
Jan 1, 2022 588,991 500,000 88,991
July 1, 2022 594,331 500,000 94,484
Discount on BP CV of BP
1,147,040 8,852,960
1,115,862 8,884,138
1,082,814 8,917,186
1,047,783 8,952,217
1,029,216 8,970,784
1,010,650 8,989,350
971,289 9,028,711
929,566 9,070,434
885,340 9,114,660
838,461 9,161,539
788,768 9,211,232
736,094 9,263,906
680,260 9,319,740
621,076 9,378,924
558,340 9,441,660
491,841 9,508,159
421,351 9,578,649
346,632 9,653,368
267,430 9,732,570
183,476 9,816,524
94,484 9,905,516
- 10,000,000
D 1 Date IE IP Amortization
Jan 1, 2013
July 1, 2013 70,323 75,000 4,677
Jan 1, 2014 70,042 75,000 4,958
July 1, 2014 69,745 75,000 5,255
Jan 1, 2015 69,429 75,000 5,571
July 1, 2015 69,095 75,000 5,905
Jan 1, 2016 68,741 75,000 6,259
July 1, 2016 68,365 75,000 6,635
Jan 1, 2017 67,967 75,000 7,033
July 1, 2017 67,545 75,000 7,455
Jan 1, 2018 67,098 75,000 7,902
July 1, 2018 66,624 75,000 8,376
Jan 1, 2019 66,121 75,000 8,879
July 1, 2019 65,588 75,000 9,412
Jan 1, 2020 65,024 75,000 9,976
July 1, 2020 64,425 75,000 10,575
Jan 1, 2021 63,790 75,000 11,210
July 1, 2021 63,118 75,000 11,882
Jan 1, 2022 62,405 75,000 12,595
July 1, 2022 61,649 75,000 13,351
Jan 1, 2023 60,848 75,000 14,136

Carrying value of BP - Dec 31, 2014 921,266

(1,151,583 * 800/1000)

B 2 Cash Paid 265,000

Interest Expense (15,000)
Redemption price 250,000
CV of bonds redeemed (230,316)
Loss on Bond Redemption 19,684

C 3 Accrued Interest - Dec 31, 2014 60,000

B 4 Jan. 1 - June 30 69,745

July 1 - Dec 31 69,429
Bond Interest Expense - Dec 31, 2014 139,174
Premium on BP CV of BP
172,044 1,172,044
167,367 1,167,367
162,409 1,162,409
157,153 1,157,153
151,582 1,151,582
145,677 1,145,677
139,418 1,139,418
132,783 1,132,783
125,750 1,125,750
118,295 1,118,295
110,393 1,110,393
102,016 1,102,016
93,137 1,093,137
83,725 1,083,725
73,749 1,073,749
63,174 1,063,174
51,964 1,051,964
40,082 1,040,082
27,487 1,027,487
14,136 1,014,136
- 1,000,000
B 1 Warranty Expense 216,000

A 2 Estimated Liability, beg 272,000

Warranty Expense 216,000
Actual Warranty Costs (328,000)
Estimated Liability, end 160,000

D 3 Premium Expense 151,200

D 4 Inventory, beg 79,900

Purchased CD players 442,000
CD players redeemed (408,000)
Inventory, end 113,900

D 5 Estimated premium claims outs, beg 89,600

Premiums expense 151,200
Actual redemption (168,000)
Estimated premium claims outs, end 72,800