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 face value of $50,000 on January 1, 2008.
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. Prepare the journal entry for the payment of interest on December 31, 2010 (the third year), and the balance sheet presentation of the bonds on that date.
Step by Step Answer:
Financial Accounting The Impact On Decision Makers
ISBN: 9780324655230
6th Edition
Authors: Gary A. Porter, Curtis L. Norton