Bama Company sold $500,000 par value 10 year bonds on July 1, 2018. The bonds pay interest semiannually (assume payment dates are July 1 and December 31 each year) and have a stated rate of 5.5%. The bonds were issued on July 1, 2018 when the market rate of interest was 4.8%.

Required:

1. How much cash will Bama receive from the issuance of the bond?

2. Using Excel, prepare an amortization schedule for the bond. Make sure the dates of each payment period is clearly labeled.

3. Bama issues its financial statements on December 31, 2020 Complete the financial statement table in the answer sheet to reflect how the bond will be represented in the 2020 financial statements for the year ended December 31, 2020.

4. After making the July 1, 2021 payment, Bama retires 25% or 14 of the bond issue (i.e. the company retires $125,000 face value of the bonds) by purchasing them on the market. Bama pays $127,500 to retire the bonds. Complete the financial statement template in the answer sheet for this transaction. Make sure to indicate the direction of changes and the relevant amounts.