Amortization of Premium

Stacy Company issued five-year, 9% 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 7% and the proceeds from the bond issuance equal $27,050.

Required:

1. Prepare a 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.

Prepare the journal entry for the payment of interest and the amortization of premium on December 31, 2018 (the third year).

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.

Stacy Company Premium Amortization Effective Interest Method of Amortization Cash Interest 9% Interest Expense 7% Premium Amortized Carrying Value Date 1/01/16 12/31/18 12/31/19 12/31/20 2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization? Interest expense Cash interest payment Premium amortized