Question

Oak Branch Inc. issued $860,000 of 8%, 10-year bonds when the market rate was 7%. They received $921,127. Interest was paid semi-annually. Prepare an amortization table for the first three years of the bonds. Round intermediate and final answers to whole dollar amount.

	Cash Interest Payment	Interest on Carrying Value	Amortization of Premium	Carrying Value
Jan. 1, Year 1				$
June 30, Year 1	$	$	$
Dec. 31, Year 1
June 30, Year 2
Dec. 31, Year 2
June 30, Year 3
Dec. 31, Year 3

Answer 1

Amortization table-Effective Interest method
	Col I	Col II	Col III	Col IV
Date	Interest Payment($860,000*4%)	Interest on carrying value(Bond carrying amount*3.5%)	Premium amorrtization	Bond carrying amount
Jan 1, Year 1				921,127
Jun 30, Year 1	34,400	32,239	2,161	918,966
Dec 31, Year 1	34,400	32,164	2,236	916,730
Jun 30, Year 2	34,400	32,086	2,314	914,416
Dec 31, Year 2	34,400	32,005	2,395	912,020
Jun 30, Year 3	34,400	31,921	2,479	909,541
Dec 31, Year 3	34,400	31,834	2,566	906,975