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On January 1st, 2016, Whale Boats Co. issued a 9 year $670,000 bond with a 3%...

On January 1st, 2016, Whale Boats Co. issued a 9 year $670,000 bond with a 3% coupon rate paid quarterly on March 31st, June 30th, September 30th, and December 31st for $900,000. Whale Boats Co. records interest quarterly. What is the premium amortization recorded by the firm on March 31st, 2017 (if no premium is recorded answer 0)? Assume the firm amortizes premium using the straight-line method.

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Answer #1
Sales price of bonds 900000
Less: Face value 670000
Premium on issue 230000
Annual Premium amortization 25556 =230000/9
Quarterly Premium amortization 6389 =25556*3/12
Premium amortization recorded by the firm on March 31st, 2017 = $6389
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