Amortization of Discount

Stacy Company issued five-year, 6% bonds with a face value of $16,000 on January 1, 2016. Interest is paid annually on December 31. The market rate of interest on this date is 8%, and Stacy Company receives proceeds of $14,722 on the bond issuance.

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

Required:

1. Prepare a five-year table to amortize the discount using the effective interest method.

If required, round all calculations to the nearest dollar. Enter all amounts as positive numbers.

3. Prepare the journal entry for the payment of interest and the amortization of discount on December 31,

option: 1 and 2 :Bond expanse, bond payable, discount on bonds payable, interest expense, prepaid interest. 3: cash. interest expense, prepaid interest, bond expense, bond payable.

Discount Amortization Cash Interest 690 Interest Expense 8% Discount Amortized Carrying Value Date 1/01/16 12/31/17 12/31/18 12/31/19 12/31/20 Totals 2. What is the total interest expense over the life of the bonds? cash interest payment? discount amortization? Total interest expense Cash interest payment Discount amortization