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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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Exercise 9-83 Installment Notes

Refer to the information for Dandy Candy above

Required;

Prepare the amortization table using the effective interest rate methcxi. (Note: Round to the nearest penny.)

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 using the effective interest rate method.

Explanation

The Amortization Table using the effective interest rate method is prepared as follows:

Dandy Candy
Amortization Table
Date Beginning Carrying Value Interest Expense Installment Paid Principal Payment Ending Carrying Value
A B = A*8%/12 C D = C-B E = E-D
Jan. 1, 2021 45,000 45,000
Jan. 31, 2021 45,000 $ 300.00 $ 3,914.50 $ 3,614.50 41,386
Feb. 28, 2021 41,386 $ 275.90 $ 3,914.50 $ 3,638.60 37,747
Mar. 31, 2021 37,747 $ 251.65 $ 3,914.50 $ 3,662.85 34,084
Apr...

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