Amortization of Premium

Stacy Company issued five-year, 9% bonds with a face value of $18,000 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 $19,476.

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.

Stacy Company
Premium Amortization
Effective Interest Method of Amortization
Date	Cash Interest 9%	Interest Expense 7%	Premium Amortized	Carrying Value
1/01/16				$
12/31/16	$	$	$
12/31/17
12/31/18
12/31/19
12/31/20
Totals	$	$	$

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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	$