In: Accounting
On January 1, 2014, Partridge Advertising Company issued $50,000 of 6-year bonds with a stated rate of 3%. The market rate at time of issue was 4%, so the bonds were discounted and sold for $47,356. Partridge uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Prepare the amortization table for the first four interest payments. (Round your answers to nearest dollar number.)
Solution:
Bond Amortization Schedule | |||||
Period | Date | Cash Paid | Interest Expense | Discount Amortized | Carrying Value |
0 | 01-Jan-14 | $47,356 | |||
1 | 30-Jun-14 | $750 | $947 | $197 | $47,553 |
2 | 31-Dec-14 | $750 | $951 | $201 | $47,754 |
3 | 30-Jun-15 | $750 | $955 | $205 | $47,959 |
4 | 31-Dec-15 | $750 | $959 | $209 | $48,168 |