Question
On January 1 of this year, Houston Company issued a bond with a face value of $13,500 and a coupon rate of 6 percent. The
On January 1 of this year, Houston Company issued a bond with a face value of $13,500 and a coupon rate of 6 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 5 percent. Houston uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.)
Required:
1. Complete a bond amortization schedule for all three years of the bond's life. (Enter all values as positive values.)
Date | Cash Interest | Interest Expense | Premium Amortization | Book Value of Bond |
Jan 01, Year 1 | ||||
Dec 31, Year 1 | ||||
Dec 31, Year 2 | ||||
Dec 31, Year 3 |
2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2?
Dec 31 | Year 1 | Year 2 |
Interest Expense | ||
Bond Liability |
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