Bridgeport Corporation wished to raise money for a series of upcoming projects. On July 1, 2017, the company issued bonds with a face value of $5,645,000 due in 5 years, paying interest at a face rate of 8% on January 1 and July 1 each year. The bonds were issued to yield 6%. Bridgeport used the effective interest method of amortization for bond discounts or premiums. The company’s year-end was September 30.
Prepare a complete Bond Premium/Discount Amortization Schedule (i.e. all five years) for Bridgeport Corporation.
PV table:
Answers
--Cash interest payable 6 monthly =
5645000 x 8% x 6/12 = $ 225800
--Factor table required of 3% [6% x 6/12] for 10th
period.
--Present values:
Present value of interest payment = 225800
x 8.53020 [Present value of annuity at 3% for 10 periods] = $
1,926,119
Present value of Face value = 5645000 x
0.74409 [Present value of $1 at 3% for 10th period] = $
4,200,0388
--Total Carrying value = 4200388 + 1926119 = $ 6,126,507
Date |
Cash Paid |
Interest expense |
Premium Amortised |
Carrying Value |
01-Jul-17 |
$6,126,507 |
|||
01-Jan-18 |
$225,800 |
$183,796 |
$42,004 |
$6,084,503 |
01-Jul-18 |
$225,800 |
$182,536 |
$43,264 |
$6,041,239 |
01-Jan-19 |
$225,800 |
$181,238 |
$44,562 |
$5,996,677 |
01-Jul-19 |
$225,800 |
$179,901 |
$45,899 |
$5,950,779 |
01-Jan-20 |
$225,800 |
$178,524 |
$47,276 |
$5,903,503 |
01-Jul-20 |
$225,800 |
$177,106 |
$48,694 |
$5,854,809 |
01-Jan-21 |
$225,800 |
$175,645 |
$50,155 |
$5,804,655 |
01-Jul-21 |
$225,800 |
$174,140 |
$51,660 |
$5,752,994 |
01-Jan-22 |
$225,800 |
$172,590 |
$53,210 |
$5,699,784 |
Bridgeport Corporation wished to raise money for a series of upcoming projects. On July 1, 2017,...
Bridgeport Corporation wished to raise money for a series of upcoming projects. On July 1, 2017, the company issued bonds with a face value of $5,645,000 due in 5 years, paying interest at a face rate of 8% on January 1 and July 1 each year. The bonds were issued to yield 6%. Bridgeport used the effective interest method of amortization for bond discounts or premiums. The company’s year-end was September 30. Prepare a complete Bond Premium/Discount Amortization Schedule (i.e....
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