xample #5, On January 1, 2016 a company issues 100 bonds, each for $1,000, for a premium as the interest rate on the bond (stated/coupon rate) is 5% and the market rate is 4%. They then used this cash to purchase an automobile for $100,000 cash. The bond is to be paid in at the end of THREE years (December 31, 2018) Cash received from issuing bond Present value of maturity payment $100,000 Present value of interest payment ($100,000*.05-$5,000) Present value of cash payments Date 1/1/2016 Account Name Debit Credit 12/31/2016 (Premium balance: 2,775.09-889.00-1,886.09) Date 12/31/2017 Account Name Debit Credit (Premium balance: 1,886.09-924.56-961.53) Account Name Debit Credit Date 12/31/2018 (Premium balance is now zero)