Amortization of Discount

Stacy Company issued five-year, 10% bonds with a face value of $10,000 on January 1, 2016. Interest is paid annually on December 31. The market rate of interest on this date is 12%, and Stacy Company receives proceeds of $9,279 on the bond issuance.

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

1. Prepare a five-year table to amortize the discount using the effective Interest method. Note: Round the 12/31/16 interest expense and discount amortized up to the nearest dollar. For all other computations, follow normal rounding to the nearest dollar. Enter all amounts as positive numbers. Stacy Company Discount Amortization Effective Interest Method of Amartization Date Cash Interest 10% Interest Expense 12% Discount Amortized Carrying Value 1/01/16 12/31/16 12/31/17 12/31/16 12/31/19 12/31/20 Totals 2. What is the total interest expense over the life of the bands? cash interest payment? discount amortization? Total interest expense Cash Interest payment Discount amortization 3. Prepare the journal entry for the payment of interest and the amortization af discount on December 31, 2018. Indicate the effect on financial statement items by selecting "-' for decrease (or negative effect), '+' for increase (ar positive effect) and "NE" for No Entry (or no effect) on the financial statement Journal Balance Sheet Income Statement Net Stockholders' Equity Date Description Debit Credit Assets Liabilities + Revenues Expenses Income 2018 Dec. 31 Determine the balance sheet presentation of the bonds for December 31, 2018. Stacy Company Balance Sheet (Partial) December 31, 2018 $