# Preparing an Amortization Table for Noninterest-Bearing Bonds (Straight Line) On January 1, 2020. Birch Inc. borrowed \$2,500,000 by issuing 3-year, zero coupon bonds. The face value of the bonds is \$2,680,000. Birch uses the straight-line method to amortize any premium or discount. Required: Prepare an amortization table for these bonds using the following column headings:

### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

#### Solutions

Chapter 9, Problem 99PSB
Textbook Problem

## Preparing an Amortization Table for Noninterest-Bearing Bonds (Straight Line)On January 1, 2020. Birch Inc. borrowed \$2,500,000 by issuing 3-year, zero coupon bonds. The face value of the bonds is \$2,680,000. Birch uses the straight-line method to amortize any premium or discount.Required:Prepare an amortization table for these bonds using the following column headings:

Expert Solution
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 of Solution

The Bond Amortization table using the Straight Line method is as follows:

 Birch Inc. Amortization Table Straight line method Date Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value

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