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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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ProblemA Preparing a Bond Amortization Table (Straight Line}

On January 1, 2021, Distei Company borrowed $102,700 by issuing 3-year, 9% bonds with a face amount of S 100,000. Interest is paid annually on December 31.

Required:

Prepare an amortization table using the following column headings:

Chapter 9, Problem 93PSA, ProblemA Preparing a Bond Amortization Table (Straight Line} On January 1, 2021, Distei Company

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 bond amortization table using the straight line method.

Explanation

The bond amortization table using the straight line method is explained as follows:

Distel Company
Amortization Table
Straight line method
Date Cash Payment (Credit) Interest Expense (Debit) Premium on Bonds Payable (Debit) Premium on Bonds Payable Balance

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