MBTA Corporation issued bonds and received cash in full for the issue price. The bonds were dated

Question:

MBTA Corporation issued bonds and received cash in full for the issue price. The bonds were dated and issued on January 1, 2011. The stated interest rate was payable at the end of each year. The bonds mature at the end of four years. The following schedule has been completed (amounts in thousands):

Amortization Date Cash Interest Balance January 1, 2011 End of year 2011 End of year 2012 End of year 2013 End of year 2

Required:
1. Complete the amortization schedule.
2. What was the maturity amount of the bonds?
3. How much cash was received at the date of issuance (sale) of the bonds?
4. Was there a premium or a discount? If so, which and how much?
5. How much cash will be disbursed for interest each period and in total for the full life of the bond issue?
6. What method of amortization is being used? Explain.
7. What is the stated rate of interest?
8. What is the effective rate of interest?
9. What amount of interest expense should be reported on the income statement each year?
10. Show how the bonds should be reported on the balance sheet at the end of each year (show the last year immediately before retirement of thebonds).

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