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Exercise 10-15 Straight-Line: Amortization and accrued bond interest expense LO P2

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Duval Co. issues four-year bonds with a $117,000 par value on January 1, 2017, at a price of $112,870. The annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31.

Exercise 10-15 Part 1

1. Prepare an amortization table for these bonds. Use the straight-line method of interest amortization. (Round your answers to the nearest dollar amount.)
  

	Semiannual Unamortized Carrying Period-End Discount Value 6/01/2017 11/30/2017 5/31/2018 11/30/2018 5/31/2019 11/30/2019 5/31/2020 11/30/2020 5/31/2021

Answer 1

• All working forms part of the answer
• Amount of Discount = $ 117,000 - $ 112,870 = $ 4,130
• No. of period = 4 years x 2 semi annual payments = 8 periods
• Discount to be amortised with each interest payment = 4130 / 8 = $ 516
• Requirement

Semiannual Period-End	Amount of Discount amortised	Unamortized Discount	Carrying Value
	[A: for understanding purpose]	[B = B – A]	[ C = C + A]
06-01-2017	$                       -	$                       4,130	$        112,870
11/30/2017	$                    516	$                       3,614	$        113,386
5/31/2018	$                    516	$                       3,098	$        113,903
11/30/2018	$                    516	$                       2,581	$        114,419
5/31/2019	$                    516	$                       2,065	$        114,935
11/30/2019	$                    516	$                       1,549	$        115,451
5/31/2020	$                    516	$                       1,033	$        115,968
11/30/2020	$                    516	$                          516	$        116,484
5/31/2021	$                    516	$                              -	$        117,000