In: Accounting
Make journal entries
= interest payment for year ‘t’ - amortization of premium for year ‘t’ or + amortization of discount for year ‘t’
= initial balance of discount or premium / # of years in the outstanding period
$7,387/5 years = $1,478/year
Interest expense 10,478
Cash 9,000
Discount on BP 1,478
Must make the above journal entries at the end of each year for 5 years