In: Finance
Interest expense |
Cash interest paid |
Discount amortization |
Discount balance |
Bond payable, net |
|
0 |
|||||
1 |
|||||
2 |
a.
Interest expense (Bond payable *13%*1/2) |
Cash interest paid (40,000,000*12%*1/2) |
Discount amortization (Interest expense - Cash interest) |
Discount balance | Bond payable, net | |
0 | 2203701 | 37,796,299 | |||
1 | 2456759.435 | 2,400,000 | 56,759 | 2,146,942 | 37,853,058 |
2 | 2460448.798 | 2,400,000 | 60,449 | 2,086,493 | 37,913,507 |
b. Interest paid remains fixed i.e. the coupon payment is same each half year which is calculated on the face value of the bonds. While the interest expense is calculated on the bond payable balance that is at the end of the each semi annual period. The balance in bond payable increases with each interest payment and amortization of discount.