EXERCISE 14-7 - Paid Interes t Expen se Discou nt Amorti...

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EXERCISE 14-7 (15–20 minutes) The effective-interest or yield rate is 12%. It is determined through trial and error using Table 6-2 for the discounted value of the principal (\$1,702,290) and Table 6-4 for the discounted value of the interest (\$1,081,434); \$1,702,290 plus \$1,081,434 equals the proceeds of \$2,783,724. (A financial calculator may be used to determine the rate of 12%.)

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EXERCISE 14-7 (Continued) Schedule of Discount Amortization Effective-Interest Method (12%) Year Cash
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Unformatted text preview: Paid Interes t Expen se Discou nt Amorti zed Carryin g Amoun t of Bonds (1) (2) (3) (4) Jan. 1, 2010 \$2,783, 724.00 Dec. 31, 2010 \$300,0 00 \$334,04 6.88 * \$34,04 6.88 2,817,7 70.88 Dec. 31, 2011 300,00 338,132 .51 38,132. 51 2,855,9 03.39 Dec. 31, 2012 300,00 342,708 .41 42,708. 41 2,898,6 11.80 Dec. 31, 2013 300,00 347,833 .42 47,833. 42 2,946,4 45.22 Dec. 31, 2014 300,00 353,554 .78 ** 53,554. 78 3,000,0 00.00 *\$334,046.88 = \$2,783,724 X .12. **Rounded....
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