Bonds payable are dated January 1, 2014, and are issued on that date. The face value of

Question:

Bonds payable are dated January 1, 2014, and are issued on that date. The face value of the bonds is $100,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%.

Required
1. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period?
2. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2014? What amount of interest expense should be reported for the period from July 1 to December 31, 2014?

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...

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