In: Accounting
On July 1, 2005, J & J, Inc. issued 9% bonds in the face amount of $5,000,000, which mature on July 1, 2015. The bonds were issued for $4,695,000 to yield 10%, resulting in a bond discount of $305,000. J & J uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2007, J & J’s unamortized bond discount should be how much?
Period |
Cash Interest |
Interest Expense |
Discount Amortised |
Unamortised Discount |
Carrying Value |
[A = 5000000 x 9%] |
[B = Last 'E' x 10%] |
[C = B - A] |
[D = D - C] |
[E = E + C] |
|
01-Jul-05 |
$ 305,000.00 |
$ 4,695,000.00 |
|||
30-Jun-06 |
$ 450,000.00 |
$ 469,500.00 |
$ 19,500.00 |
$ 285,500.00 |
$ 4,714,500.00 |
30-Jun-07 |
$ 450,000.00 |
$ 471,450.00 |
$ 21,450.00 |
$ 264,050.00 = Answer |
$ 4,735,950.00 |