Question 1 (30%)

UPI Corporation issued Bonds Rp 4.000,000 of 10 % . Term bonds on January 1, 2018, due on
January 1, 2022, with interest payable each July 1 and January 1. Calculate the bonds proceeds and
Journal entry on date of issue if ......
a. Investors require an effective-interest rate of 8%
b. Investors require an effective-interest rate of 10%
c. Investors require an effective-interest rate of 12%

Question 2 (35%)

On, January 5, 2017, Persada Company has the following equity accounts at December 2016.
Share Capital_ordinary ($10 par value) $ 480,000
Retained Earning 294,000

During 2017, Persada Company took part in the following transaction concerning equity :
Jan, 11 Issued 25,000 Ordinary shares at $16 per share
June, 1 Purchased 1,800 Ordinary shares at $17 per share (use Cost method)
July, 10 Sold the 700 Treasury shares at $14 per share
Aug 29 Sold the 1,100 Treasury shares at $20 per share
Dec 31 Declared a $0,75 per shares cash dividends on the ordinary shares
Dec 31 Closed the Income Summary Account. There was $ 175,700 net income

Intructions :
1. Record the journal entries for the transaction listed above
2. Prepare the Equity section of Persada Company’s Statement of Financial Position as of
December 31, 2017

Question 3 (35%)
 ANSWER KEY
Question 1 (30%)

a) Investors require an effective-interest rate of 8%

Nominal Value = 4,000,000 x 0.730690 = $ 2,922,761
Interest value = 4,000,000 x 5% x 6.73275 = 1,346,550

$ 4,269,311

Cash $ 4,269,311 -
Bonds Payable - $ 4,269,311

b) Investors require an effective-interest rate of 10%

Cash $ 4,000,000 -
Bonds Payable - $ 4,000,000

c) Investors require an effective-interest rate of 12%

Nominal Value = 4,000,000 x 0.6274124 = $ 2,509,650

Interest value = 4,000,000 x 5% x 6.209793 = 1,241,959
$ 3,751,609

Cash $ 3,751,609 -
Bonds Payable - $ 3,751,609

Question 2 (35%)

Jan,11 Cash 400,000 -

Share Capital_ordinary - 250,000
Share Premium_Ord - 150,000

June,11 Treasury share 30,600

Cash - 30,600

July,10 Cash 9,800 -

Share Premium_TS 2,100 -
Treasury share - 11,900

Aug,29 Cash 22,000 -

Share Premium_TS- 3,300
Treasury share - 18,700

Dec,31 Retained Earning 54,750 -

Divd payable - 54,750
(48000+25000-1800+700+1100)*0.75

The Equity section of Persada Company’s Statement of Financial Position as of December 31, 2017

Share Capital_ordinary ($10 par value) $ 730,000

Share Premium_ordinary 150,000
Share Premium_TS 1,200
Retained Earning 414,950
1,296,150
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