Part A: Update Bond Amortization Schedule for ASU 2015-03

In April 2015, the FASB issued ASU 2015-03 simplifying the presentation of debt issuance costs. All companies were required to implement this standard after 2017. This new standard requires that debt issuance costs be deducted from the carrying value of the financial liability and not recorded as a separate asset. It was determined that debt issuance costs are similar to debt discounts and reduce the proceeds of borrowing, thereby increasing the effective interest rate.

Your manager has asked you to update the bond amortization schedule for the new ASU 2015-03. First, review the current spreadsheet and formulas. Add issue costs to the input area. Add another line to output for cash proceeds after bond issuance costs. You will then need to calculate a new effective interest rate and then change the formulas in the bond amortization schedule to reflect the change. Your notes from Chapter 14 should be very helpful. Test your spreadsheet with any input values and note that at the end of the amortization period your bond should have a value equal to the face value of the bond.

Bond Issue Cost is $23,000

Part B: Asset Retirement Obligation (ARO)

Due to the type of business that your company is involved in, they often need to record an asset retirement obligation associated with the acquisition of long-lived assets. Create a model that will determine the amount the entity should record as an asset and a liability on the balance sheet at initial measurement. (Initial measurement is the present value of the future obligation. ) For your original data, use a future obligation of $1,500,000 with an annual interest rate of 6% and the obligation is due in 10 years. Your output area should include the initial measurement of the ARO. Your spreadsheet should also include a schedule which will include the annual interest expense (accretion expense), annual depreciation expense on the additional amount added to the asset for the asset retirement obligation, total annual expense for this transaction (impact on the Income Statement) and the ending balance in the asset retirement obligation. The model should be for a maximum of thirty years. You may also assume straight line depreciation with no salvage value. (Hint: look at notes from Chapter 6)

Bond Amortization Schedule
Input
Bond Data:
Maturity Value			$ 100,000.00
Bond Issue Date			1/1/20119
Stated Interest Rate			3.00%
Market Interest Rate			4.00%
Years Outstanding			10
Times Interest Paid During the Year			4
Bond Issue Cost			$23,000
Output
Bond Report:
Present Value of Future Cash Flows:			$91,791.33