ACCOUNTG 221 Lecture Notes - Lecture 8: Interest Expense, Amortization Schedule, Debits And Credits

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apricotgoldfish514

7 Dec 2016

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5 steps to find what bonds are sold for we use effective rate method, not straight line method: 1. Determine if the bond is sold for a discount or premium: 2. Find pv of principal (face amount of bond use lump sum table: 3. Find pv of the future cash flows interest (use annuity table: 4. Book the sale of the bond in the equation: 5. Selling bonds example: on 1/1, clock corp. sells ,000,000 in bonds having a stated rate of 6% annually. The bonds mature in 10 years, and interest is paid annually. The market rate is 8% annually: determine the proceeds from this bond issue, two parts to the bond payments: Pv of a single amount of million ten years in the future at 8% Use calculator or pv of single amount table: Pv of an ordinary annuity of ,000 for 10 periods at an interest rate of 8%

Related Questions

On December 31, 2018, Interlink Communications issued 6% statedrate bonds with a face amount of $104 million. The bonds mature onDecember 31, 2048. Interest is payable annually on each December31, beginning in 2019. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from thetables provided.) Determine the price of the bonds on December 31,2018, assuming that the market rate of interest for similar bondswas 7%

Table values are based on:
n =	30
i =	7%
Cash Flow	Amount	Present Value
Interest
Principal
Price of bonds

mauvegnat752

On July 1, 2010, Atwater Corporation issued $1,681,700 face value,9%, 10-year bonds at $1,920,720. This price resulted in aneffective-interest rate of 7% on the bonds. Atwater uses theeffective-interest method to amortize bond premium or discount. Thebonds pay semiannual interest July 1 and January 1.

Instructions
(Round all computations to 0 decimal places, e.g. 125. Use roundedamounts for future computations.)

Prepare an amortization table through December 31, 2011 (3 interestperiods) for this bond issue.

Semiannual Interest Periods/ Interest to Be Paid/ Interest Expense/Premium Amortization/ Unamortized Premium/ Bond CarryingValue

Issue Date
1
2
3

bluewater-buffalo887

On July 1, Hanover Company issued $2,000,000 of 10-year, 6%bonds at an effective interest rate of 5%. This netted the company$2,154,435. Interest on the bonds is payable annually on July 1.The president of Hanover has asked you to develop an amortizationschedule worksheet (file name AMORT) that will use the effectiveinterest method to calculate annual interest expense, premium (ordiscount) amortization, unamortized premium (or discount), and bondcarrying amount. Your worksheet should include a Data Section.

Check figure: Amortization of bond premium, tenth year,$19,048.

To test your model, calculate the annual interest expense,discount amortization, unamortized discount, and bond carryingamount of $700,000 of 10-year, 7.5% bonds at an effective interestrate of 8%. The issuance of these bonds netted the company$676,515. Interest on the bonds is payable annually. Print theworksheet when done. Check figure: Amortization of bond discount,tenth year, $3,241.

Please show all the formulas.

ACCOUNTG 221 Lecture Notes - Lecture 8: Interest Expense, Amortization Schedule, Debits And Credits

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