Amortization of Premium

Stacy Company issued five-year, 12% bonds with a face value of $25,000 on January 1, 2016. Interest is paid annually on December 31. The market rate of interest of January 1, 2016, is 10% and the proceeds from the bond issuance equal $26,895.

Required:

1.Prepare five-year table to amortize the premium using the effective interest method. Enter all amounts as positive numbers. If required, round all calculations and final answers to the nearest dollar.

*Note: Due to rounding you will have to adjust the interest expense DOWN to the nearest dollar 12/31/20.

Stacy Company Premium Amortization Effective Interest Method of Amortization Date Cash Interest 12% Interest Expense 10% Premium Amortized Carrying Value 1/01/16 X 12/31/16 $ 12/31/17 12/31/18 12/31/19 12/31/20 Totals