Amortization of Discount Ortega Company issued fi ve-year, 5% bonds with a face value of $50,000 on
Question:
Amortization of Discount Ortega Company issued fi ve-year, 5% bonds with a face value 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 fi ve-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 balance sheet presentation of the bonds on that date.
AppendixLO1
Step by Step Answer:
Using Financial Accounting Information The Alternative To Debits And Credits
ISBN: 9780538452748
7th Edition
Authors: Curtis L. Norton, Gary A. Porter