Problem: Company issued $1,500,000 of its 10%, 20-year bonds on their authorized date of 6/1/05. The bonds were issued at a price of $1,796,893 to produce an effective yield of 8%. Interest payments are made twice per year, 6/1 and 12/1, with discounts and premiums being amortized using the effective interest method.
Compute the
1) balance of the premium account at 6/1/06
2) amount of interest expense reported FYE 12/31/06
3) carry value of the bond at 12/31/06