Question

Legacy issues $660,000 of 5.5%, four-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $648,412 and their market rate is 6% at the issue date.

QUESTION: Prepare a straight-line amortization table for the bonds' first two years.

Answer 1

• All working forms part of the answer
• Discount on Bonds payable = 660000 – 648412 = $ 11,588
• No. of interest payment = 4 years bonds x 2 semi annual payments = 8
• Discounts to be amortised each payment = 11588 / 8 = $ 1,448.50
• Extended Amortisation Schedule is provided below for whole life of Bonds Payable.

--Use required column and no. of periods asked

Period/Date	Cash Interest	Discount Amortised	Interest Expense	Unamortised Discount	Carrying Value	Face Value
	[A = 660000 x 5.5% x 6/12]	[B = 11588/8]	[C = A+B]	[D = D - B]	[E = E + B]	[F = D + E]
01-Jan-17				$           11,588.00	$        648,412.00	$          660,000.00
30-Jun-17	$                                18,150.00	$              1,448.50	$           19,598.50	$           10,139.50	$        649,860.50	$          660,000.00
31-Dec-17	$                                18,150.00	$              1,448.50	$           19,598.50	$             8,691.00	$        651,309.00	$          660,000.00
30-Jun-18	$                                18,150.00	$              1,448.50	$           19,598.50	$             7,242.50	$        652,757.50	$         660,000.00
31-Dec-18	$                                18,150.00	$              1,448.50	$           19,598.50	$             5,794.00	$        654,206.00	$          660,000.00
First Two years complete
Amortisation for Remaining life of Bond
30-Jun-19	$                                18,150.00	$              1,448.50	$           19,598.50	$             4,345.50	$        655,654.50	$          660,000.00
31-Dec-19	$                                18,150.00	$              1,448.50	$           19,598.50	$             2,897.00	$        657,103.00	$          660,000.00
30-Jun-20	$                                18,150.00	$              1,448.50	$           19,598.50	$             1,448.50	$        658,551.50	$         660,000.00
31-Dec-20	$                                18,150.00	$              1,448.50	$           19,598.50	$                          -	$        660,000.00	$          660,000.00