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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief Exercise Debt Issued at a Discount (Straight Line)

Use the information from Brief Exercise 9-49.

Required:

Prepare the amortization table for Mayor Company’s bonds.

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

To prepare:

The Amortization table for bonds using the straight line methods.

Explanation

The Amortization table for bonds using the straight line methods is explained as follow:

Mayor Company
Amortization Table
Straight line method
Date Bonds Par value Interest Payment Discount amortized Unamortized Discount Interest Expense Bonds Carrying Value
A B = A*6% C = 30000/5 D = D-C E = B+C F = A-D
Jan. 1, 2020 40,000,000 - - 30,000 - 39,970,000
Dec...

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