Amortization of Discount Ortega Company issued five-year, 5% bonds with a face value of $50,000 on January

Question:

Amortization of Discount Ortega Company issued five-year, 5% bonds with a of $50,000 on January 1, 2010. Interest is paid annually on December 31. The market rate of interest on this date is 8%, and Ortega Company receives proceeds of $44,011 on the bond issuance.

Required
1. Prepare a five-year table (similar to Exhibit 10-4) to amortize the discount using the effective interest method.
2. What is the total interest expense over the life of the bonds? cash interest payment? Discount amortization?
3. Identify and analyze the effect of the payment of interest on December 31, 2012 (the third year), and the presentation of the bonds on that date.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...