Crane Company sells 9% bonds having a maturity value of $2,040,000 for $1,819,395. The bonds are...
Crane Company sells 9% bonds having a maturity value of $2,040,000 for $1,819,395. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1. Set up a schedule of interest expense and discount amortization under the straight-line method.
Homework Answers
| Maturity Value | $ 2,040,000.00 |
| Received Amount | $ 1,819,395.00 |
| Discount | $ 220,605.00 |
| No. of years | 5 years |
| Discount to be amortised per year | $ 44,121.00 |
| Year | Cash Paid | Interest Expense | Discount Amortised | Carrying Amount of Bonds |
| Jan, 2021 | 183,600.00 | $ 227,721.00 | $ 44,121.00 | $ 1,863,516.00 |
| Jan, 2022 | 183,600.00 | $ 227,721.00 | $ 44,121.00 | $ 1,907,637.00 |
| Jan, 2023 | 183,600.00 | $ 227,721.00 | $ 44,121.00 | $ 1,951,758.00 |
| Jan, 2024 | 183,600.00 | $ 227,721.00 | $ 44,121.00 | $ 1,995,879.00 |
| Jan, 2025 | 183,600.00 | $ 227,721.00 | $ 44,121.00 | $ 2,040,000.00 |
Note : It is assumed that maturity value of $2,040,000 is also the Face value of Bonds
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Straight-Line Method
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