Question
In: Accounting
On January 1, 2020, Ironman Steel issued $900,000, 8-year bonds for $990,000. The stated rate of...
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On January 1, 2020, Ironman Steel issued $900,000, 8-year bonds for $990,000. The stated rate of interest was 9% and interest is paid annually on December 31.
Required:
Prepare the amortization table for Ironman Steel's bonds. If required, round your answers to nearest whole value. If an amount box does not require an entry, leave it blank and if the answer is zero, enter "0".
Ironman Steel Amortization Table Period Cash Payment (Credit) Interest Expense (Debit) Premium on Bonds Payable (Debit) Premium on Bonds Payable Balance Carrying Value At issue $ $ $ $ $ 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 An amortization table helps calculate the proper amortization of bond premium or discount. They are particularly helpful when the effective interest rate method is used; however, this problem amortizes the premium using the straight-line method.
Solutions
Expert Solution
| Face Value of bonds | 900,000.00 | ||||
| Issue price | 990,000.00 | ||||
| Premium on bonds | 90,000.00 | ||||
| Ironman Steel | |||||
| Amortization Table | |||||
| Period | Cash Payment (Credit) =900,000*9% | Interest Expense (Debit) | Premium on Bonds Payable (Debit) | Premium on Bonds Payable Balance | Carrying Value |
| At issue | $ | $ | 90,000.00 | 990,000.00 | |
| 12/31/2020 | 81,000.00 | 69,750.00 | 11,250.00 | 78,750.00 | 978,750.00 |
| 12/31/2021 | 81,000.00 | 69,750.00 | 11,250.00 | 67,500.00 | 967,500.00 |
| 12/31/2022 | 81,000.00 | 69,750.00 | 11,250.00 | 56,250.00 | 956,250.00 |
| 12/31/2023 | 81,000.00 | 69,750.00 | 11,250.00 | 45,000.00 | 945,000.00 |
| 12/31/2024 | 81,000.00 | 69,750.00 | 11,250.00 | 33,750.00 | 933,750.00 |
| 12/31/2025 | 81,000.00 | 69,750.00 | 11,250.00 | 22,500.00 | 922,500.00 |
| 12/31/2026 | 81,000.00 | 69,750.00 | 11,250.00 | 11,250.00 | 911,250.00 |
| 12/31/2027 | 81,000.00 | 69,750.00 | 11,250.00 | - | 900,000.00 |
| Note - Assumed straight line method of depreciation | |||||
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