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136B Notes 2_3_11 - 136B Notes Premium Example*Bonds issues...

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2/3/11: 136B Notes Premium Example *Bonds issues 12/31/07 with a face value of $100,000 *Principal due 12/31/10 *Interest payable annually, beginning 12/31/08, at a stated rate of 7% *Effective Interest Rate was 6% *On 3/31/09, $60,000 face value of bonds were reaquired at 101, plus accrued interest 12/31/07: PV of Principal: $100,000 x .83962 = $83,962 PV of Interest: (7% x $100,000) x PVOA n=3;6% 7,000 x 2.67301 $18,711 $102,673 J/E- 12/31/07: Cash 102,673 $ BP 100,000 $ Premiums 2,673 $ Amortization Schedule: <6%> <7%> <FV+Unam. Prem> Date Eff. Int. Rate - Stated Int. = Prem. Amor. CV of BP 12/31/07 - - - $102,673 12/31/08 (6%*$102,673) 6,160 $ 7,000 $ 840 $ 101,833 $ 12/31/09 6,110 $ 7,000 $ 890 $ 100,943 $ 12/31/10 6,057 $ 7,000 $ 943 $ 100,000 $ J/E for 12/31/08: Interest Exp. 6,160 $ Premium 840 $ Cash 7,000 $ J/E for 3/31/09: Interst Exp. 917 [$6,110*(3/12)x60%]= $917 Premum 133 [$890*(3/12)*60%] = $133 Cash [$7,000*(3/12)*60%] = $1,050 ^^^Interest Entry… now for the reacquisition entry… 3/31/09: Reacquisition Price 60,600 $ [$60,000x101%]=$60,600 CV of bonds reacq: Total CV @ 12/31/08: 101,833 $ Prem Am. 12/31/08-3/31/09: (222) $ [$890*(3/12)] Total CV @ 3/31/09: 101,611 $ % of bonds reacquired 60% CV of bonds reacq: 60,967 $ 367 $ GAIN ((Continued below))
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J/E @ 3/31/09: B/P 60,000 $ Premium 967 $ Cash 60,600 $ Gain 367 $ -------------------------------------- ** Original Total Premium 2,673 $ Less: 2008 Amortization (840) $ Total Premium, 12/31/08 1,833 $ % of bonds reacquired 60%
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