Problem 1
A company issued a $50,000 four-year, 4% bond on January 1. Bond interest is paid each December 31. The bond was sold to yield 5%.
Required:
Complete a bond amortization schedule for the life of the bond using the effective interest method.
Problem 2
A company with an annual accounting year ending on December 31 issued bonds on January 1 in the amount of $500,000 maturing in 10 years with interest payable each June 30 and December 31 at a 6% annual rate. The company uses straight-line amortization for any bond discounts or premiums.
Required:
Provide the following amounts to be reported in the company financial statements at the end of year one under each scenario.
|
|
Issued at Par
|
Issued at 99
|
Issued at 102
|
|
Interest expense
|
|
|
|
|
Bonds payable
|
|
|
|
|
Unamortized premium or discount
|
|
|
|
|
Net bond liability
|
|
|
|
|
Cash interest paid
|
|
|
|