Question

Windsor Co. sells $451,000 of 8% bonds on March 1, 2020. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2023. The bonds yield 12%. Give entries through December 31, 2021. Prepare a bond amortization schedule using the effective-interest method for discount and premium amortization. Amortize premium or discount on interest dates and at year-end. (Round answers to 0 decimal places, e.g. 38,548.)

Schedule of Bond Discount Amortization

Effective-Interest Method

Bonds Sold to Yield

Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Bonds

3/1/20 $ $ $ $ 9/1/20 3/1/21 9/1/21 3/1/22 9/1/22 3/1/23 9/1/23

Answer 1

Computation Of Bond Price
a	Semi-annual Interest Amount	$      18,040.00
	($451000*8%/2)
b	PV Annuity Factor for (7 Years,6%)	5.5824
c	Present Value Of Annual Interest (a*b)	$ 1,00,706.16
d	Redemption Value	$ 4,51,000.00
e	PV Factor Of (7 Years,6%)	0.66506
g	Present Value Of Redemption Amount (d*e)	$ 2,99,940.76
f	Intrinsic Value ( Price ) Of The Bond (c+g)	$        4,00,647
Discount on issue of bond
=$451000-400647
=$50353

Amortization Sheadule
Date	Cash Paid	Interest expenses at 6%	Discount Amortized	Carrying Value Of Bond
03-01-2020				400647
09-01-2020	$                      18,040	$                                 24,039	$                      5,999	$                             4,06,646
03-01-2021	$                      18,040	$                                 24,399	$                      6,359	$                             4,13,005
09-01-2021	$                      18,040	$                                 24,780	$                      6,740	$                             4,19,745
03-01-2022	$                      18,040	$                                 25,185	$                      7,145	$                             4,26,890
09-01-2022	$                      18,040	$                                 25,613	$                      7,573	$                             4,34,463
03-01-2023	$                      18,040	$                                 26,068	$                      8,028	$                             4,42,491
09-01-2023	$                      18,040	$                                 26,549	$                      8,509	$                             4,51,000