On January 1, 2010 Sycamore Co. issued 7%, 5 year bonds with a face amount of 5 million dollars. The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on June 30 and December 31
1. Prepare an amortization table for Sycamore Co. assuming the effective interest method is used. Follow the format of the amortization table on page 792 in your text. Round amounts to the nearest dollar. Include all 10 payments in your table and totals for cash paid, interest expense, and discount amortized.
2. Prepare an amortization table for Sycamore Co. assuming the market rate was 6% and the effective interest method is used. Follow the format of the amortization table on page 793 in your text. Round amounts to the nearest dollar. Include all 10 payments in your table and totals for cash paid, interest expense, and premium amortized.
3. Prepare an amortization table for Sycamore assuming the market rate was 8% and the company elected to use the straight-line amortization method since the results were not materially different from the effective int. method.
Use excel's formula functions to complete your amortization tables. In other words, don't just do the tables by hand and then copy your numbers into excel. The whole point of using excel is to make this a more efficient process. If you do the tables manually and copy the numbers into excel you will receive a 0/20. You may need to manually enter the interest expense and discount/premium amortization on the last payment so that your carrying value of the bonds at 12/31/2014 is $5,000,000.