Kim Park B

|Interest Period |Total liability beginning of |Unamortized discounts |Interest expense |Liability end of period |

| |period | | | |

|1 |$466,507.38 |$533,492.62 |$46,650.74 |$513,158.12 |

|2 |$513,158.12 |$486,841.88 |$51,315.81 |$564,473.93 |

|3 |$564,473.93 |$435,526.07 |$56,447.39 |$620,921.32 |

Austral Electronics

$1,000,000 , 8 yr, zero-coupon, assuming the 10% yield is also the prevailing market rate

How should Austral have accounted for its zero-coupon bond at the issue date?

At issuance, Austral should have accounted for its zero-coupon bond as a long term liability for the present value of the bond which is $466,507.38. As a zero-coupon bond, payments will be$ 0. Interest expense is $0 at issuance. Below is the balance sheet presentation for Austral Electronics at the date of issuance:

Long-term Liabilities:

Bond payable: 1,000,000

Less Discount: (533,492.62)

Net Bond Payable: $466,507.38

How should Austral have accounted for its zero-coupon bond at the end of the first yr following its issuance?

At the end of the first yr. following its issuance, liability at the end of the period is $513,158.12. Interest expense for that period is equal to $46,650.74 ($466,507.38 x .10).

How should Austral have accounted for its zero-coupon bond at the end of the third year?

At the end of the third year, Austral should recognize a liability of $620,921.32. The interest expense for that period is $56,447.39.

United Airlines

There are several different methods used to account for...