Can you explain both the Lori company problem and example 1

Memory Tip Bat Man On l/1/201 8 Lori Company issues a 5-yr Bonds with a maturity value of S100.000 (stated interest rate of 8%). When the market rate is 10% Date Interest Expense Cash Paid (nominal Amortization of Book or Carrying Book Market) or stated rate) Discount or Premium Value 1/1/2018 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Note that Bat Man memory tip should be used for not only Bonds, but Noninterest Notes Payable and Receivables, Asset Retirement Obligations, and Leases. Example I (Noninterest Note)-Purchase Land by issuing a S500,000 noninterest note. Assume market rate of interest at 10%.

Solution

Answer 1. Table Value Based on n= 5 i= 10.00% Cash Flow Amount Present Value Interest - $100,000 X 8%                  8,000                                 30,326 ($8,000 X 3.79079) Principal              100,000                                 62,092 ($100,000 X 0.62092) Issue Price of Bonds                                 92,418 Discount on issue of Bonds                                   7,582 Bond Discount Amortization Schedule Date Interest Paid - $100,000 X 8% Interest Expense - Preceeding Bond Carrying Value X 10% Discount Amortization Unamortized Discount Bonds Carrying Amount A B C = B-A D = D - C E = $100,000 - D 1-Jan-18                                    -                                      -                                      -                          7,582                    92,418 31-Dec-18                             8,000                             9,242                             1,242                        6,340                    93,660 31-Dec-19                             8,000                             9,366                             1,366                        4,974                    95,026 31-Dec-20                             8,000                             9,503                             1,503                        3,471                    96,529 31-Dec-21                             8,000                             9,653                             1,653                        1,818                    98,182 1-Sep-22                             8,000                             9,818                             1,818                                0                  100,000 Example 1. Table Value Based on n= 5 i= 10.00% Cash Flow Amount Present Value Interest - $500,000 X 0%                         -                                            -   Principal              500,000                              310,460 ($500,000 X 0.62092) Issue Price of Note                              310,460 Discount on issue of Note                              189,540 Assuming Note is issued for the period of five years. Note Discount Amortization Schedule Date Interest Paid - $500,000 X 0% Interest Expense - Preceeding Bond Carrying Value X 10% Discount Amortization Unamortized Discount Note Carrying Amount A B C = B-A D = D - C E = $500,000 - D 1-Jan-18                                    -                                      -                                      -                     189,540                  310,460 31-Dec-18                                    -                            31,046                           31,046                   158,494                  341,506 31-Dec-19                                    -                            34,151                           34,151                   124,343                  375,657 31-Dec-20                                    -                            37,566                           37,566                      86,778                  413,222 31-Dec-21                                    -                            41,322                           41,322                      45,456                  454,544 1-Sep-22                                    -                            45,455                           45,455                                0                  500,000