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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief Exercise Bonds Issued at a Premium (Effective Interest)

Refer to the information above for Haley Industries.

Required;

Prepare the amortization table using the effective interest rate method.

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 effective interest method.

Explanation

The Amortization table for Bonds using the effective interest method is explained as follows:

Crafty Corporation
Amortization Table
Using the effective interest rate method
Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Discount Amortized Unamortized Discount Carrying Value
A=500000*5% B =Prior E *6% C =B-A D =Prior D -C E = 500000-D
0 Jan. 1, 2020 $ - $ - $ 27,912 $ 472,088
1 Dec...

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