Amortization Schedule..help!!!?

Face Value of Bonds: $2,000,000
Proceeds of Bond Issue: $2,130,080
Stated Interest Rate: 10%
Market (Effective) Interest Rate: 9%
Term of the Bond issue: 10 years
Bond Issue Date: May 1, 2010
Interest Paid: semi annually
Amortization Method: straight line
Need to figure Interest Paid, Interest Expense, Amortization Premium/Discount, Unamortized Premium/ Discount, and Bond carrying value for Nov 1 2010, May 1 2011, Nov 1, 2011, May 1, 2012, Nov 1, 2012
Im Lost!!!

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One Response to “Amortization Schedule..help!!!?”

  1. JKRB says:

    On issue date (May 1, 2010) the journal entry would be:
    Dr Cash 2,130,080
    Cr Bonds Payable 2,000,000
    Cr Premium on Bonds Payable 130,080
    I’ll show you the amortization through Nov. 1, 2010. From that point on all the adjustments are the same.
    Amortization Table
    May 1, 2010 (issue date)
    Interest Paid,
    0
    Amortization Premium/Discount,
    0
    Interest Expense,
    0
    Unamortized Premium/ Discount,
    $130,080
    Bond carrying value
    $2,130,000
    Nov 1 2010
    Interest Paid,
    (2,000,000 x 10%) / 2 = $100,000
    This will be the same amount for each successive period.
    Amortization Premium/Discount,
    130,080 / 20 = $6,504
    This will be the same amount for each successive period.
    Interest Expense,
    100,000 – 6,504 = $93,496
    This will be the same amount for each successive period.
    Unamortized Premium/ Discount,
    $130,080 – 6,504 = $123,576
    The same amount (6,504) is subtracted from the previous period’s balance.
    Bond carrying value
    $2,130,000 – 6,504 = $2,123,496
    The same amount (6,504) is subtracted from the previous period’s balance.
    All amortization periods are handled exactly the same.

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