Fall 2013_Acc 3100_Ch 14

07569 700000 074622 present value price of bonds

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 9 = $700,000 × 0.74622 = Present value (price) of bonds Present Values $ 213,179 522,354 $ 735,533 present value of $1: n=6, i=5% Because interest is paid semiannually, the present value calculations use: (a) the semiannual stated rate (6%), (b) the semiannual market rate (5%), and (c) 6 (3 x 2) semi-annual periods. 14-11 Premium Amortization Schedule Here is a bond amortization schedule showing the cash interest, effective interest, premium amortization, and the carrying value of the bonds. Date 1/ 1/ 13 6/ 30/ 13 12/ 31/ 13 6/ 30/ 14 12/ 31/ 14 6/ 30/ 15 12/ 31/ 15 Cash $ 42,000 42,000 42,000 42,000 42,000 42,000 $ 252,000 Effective Interest $ Decrease in Balance 36,777 $ 36,515 36,241 35,953 35,651 35,329 * $ 216,467 $ 5,223 5,485 5,759 6,047 6,349 6,671 35,533 Outstanding Balance $ 735,533 730,310 724,825 719,066 713,020 706,671 700,000 * Rounded. $735,533 × 5% = $36,777 $735,533 × 5% = $36,777 $735,533 - $5,223 = $730,310 $735,533 - $5,223 = $730,310 14-12 Bonds Sold at a Premium Masterwear (Issuer) Cash Premium on bonds payable Bonds payable United (Investor) Investment in bonds Premium on bond investment Cash 735,533 35,533 700,000 700,000 35,533 735,533 Interest expense and interest revenue will be recognized in a manner consistent with bonds issued at a discount. 14-13 Premi...
View Full Document

This note was uploaded on 11/19/2013 for the course ACCOUNTING 3100 taught by Professor He during the Fall '10 term at CUNY Baruch.

Ask a homework question - tutors are online