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Pearl Company sells 9% bonds having a maturity value of $1,800,000 for $1,731,764. The bonds are dated January 1, 2017, and mature January 1, 2022.
Pearl Company sells 9% bonds having a maturity value of $1,800,000 for $1,731,764. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1.
a) Determine the effective-interest rate.
The effective-interest rate _______%
b) Set up a schedule of interest expense and discount amortization under the effective-interest method.
Schedule of Discount Amortization
Effective Interest Method
Year | Cash Paid | Interest Expense | Discount Amortized | Carrying amount of bonds |
Jan. 1, 2017 | ||||
Jan. 1, 2018 | ||||
Jan. 1, 2019 | ||||
Jan. 1, 2020 | ||||
Jan. 1, 2021 | ||||
Jan. 1, 2022 |
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