a) Apply effective interest method to amortize "discount (Premium) on bonds".
b) Cases: Amortization Schedule as attached for period from Jan 1, 2021 to Jan 1, 2025.
c) Calculations: for "interest expense", "interest payment", "amortization of discount (premium)", " carrying amount of bonds" at each date.
d) Journals: necessary at each date.
Schedule of Bond Discount Amortization Effective-Interest Method-Semiannual Interest Payments 5-Year, 8% Bonds Sold to Yield 10% Carrying Cash Interest Discount Amount Date Paid Expense Amortized of Bonds 1/1/20 $ 92,278 7/1/20 $ 4,000 $ 4,614b $ 614 92,8920 1/1/21 4,000 4,645 645 93,537 7/1/21 4,000 4,677 677 94,214 1/1/22 4,000 4,711 711 94,925 7/1/22 4,000 4,746 95,671 1/1/23 4,000 4,783 783 96,454 7/1/23 4,000 4,823 823 97,277 1/1/24 4,000 4,864 864 98,141 7/1/24 4,000 4,907 907 99,048 1/1/25 4,000 4,952 952 100,000 $40,000 $47,722 $7,722 746 a $4,000 = $100,000 X.08 x 6/12 b$4,614 = $92,278 X.10 * 6/12 $614 = $4,614 $4,000 d$92,892 = $92,278 + $614 Schedule of Bond Premium Amortization Effective-Interest Method-Semiannual Interest Payments 5-Year, 8% Bonds Sold to Yield 6% Carrying Cash Interest Premium Amount Date Paid Expense Amortized of Bonds 1/1/20 $108,530 7/1/20 $ 4,000a $ 3,2565 $ 744 107,7860 1/1/21 4,000 3,234 766 107,020 7/1/21 4,000 3,211 789 106,231 1/1/22 4,000 3,187 813 105,418 7/1/22 4,000 3,162 838 104,580 1/1/23 4,000 3,137 863 103,717 7/1/23 4,000 3,112 888 102,829 1/1/24 4,000 3,085 915 101,914 7/1/24 4,000 3,057 943 100,971 1/1/25 4,000 3,029 971 100,000 $40,000 $31,470 $8,530 a$4,000 = $100,000 X.08 x 712 b$3,256 = $108,530 X.06 x 9/12 $744 = $4,000 $3,256 d$107,786 = $108,530 $744 Schedule of Bond Discount Amortization Effective-Interest Method-Semiannual Interest Payments 5-Year, 8% Bonds Sold to Yield 10% Carrying Cash Interest Discount Amount Date Paid Expense Amortized of Bonds 1/1/20 $ 92,278 7/1/20 $ 4,000 $ 4,614b $ 614 92,8920 1/1/21 4,000 4,645 645 93,537 7/1/21 4,000 4,677 677 94,214 1/1/22 4,000 4,711 711 94,925 7/1/22 4,000 4,746 95,671 1/1/23 4,000 4,783 783 96,454 7/1/23 4,000 4,823 823 97,277 1/1/24 4,000 4,864 864 98,141 7/1/24 4,000 4,907 907 99,048 1/1/25 4,000 4,952 952 100,000 $40,000 $47,722 $7,722 746 a $4,000 = $100,000 X.08 x 6/12 b$4,614 = $92,278 X.10 * 6/12 $614 = $4,614 $4,000 d$92,892 = $92,278 + $614 Schedule of Bond Premium Amortization Effective-Interest Method-Semiannual Interest Payments 5-Year, 8% Bonds Sold to Yield 6% Carrying Cash Interest Premium Amount Date Paid Expense Amortized of Bonds 1/1/20 $108,530 7/1/20 $ 4,000a $ 3,2565 $ 744 107,7860 1/1/21 4,000 3,234 766 107,020 7/1/21 4,000 3,211 789 106,231 1/1/22 4,000 3,187 813 105,418 7/1/22 4,000 3,162 838 104,580 1/1/23 4,000 3,137 863 103,717 7/1/23 4,000 3,112 888 102,829 1/1/24 4,000 3,085 915 101,914 7/1/24 4,000 3,057 943 100,971 1/1/25 4,000 3,029 971 100,000 $40,000 $31,470 $8,530 a$4,000 = $100,000 X.08 x 712 b$3,256 = $108,530 X.06 x 9/12 $744 = $4,000 $3,256 d$107,786 = $108,530 $744
