Nominal rate per quarter (10%/4) | 2.50% |
Market rate per quarter (8%/4) | 2.00% |
Number of quarters (6 yaers * 4) | 24 |
Cash interest (4000*2.5%) | $ 100 |
Debit Balance in Bond Discount at the time of purchase (4000-3500) | $ 500 |
Interest payment (Credit Cash) = Face value of bond * Coupon rate per quarter = 100 | |||||||
Interest Expense (Debit Interest Expense) = Carrying value of Bond for previous period * 2% | |||||||
Amortization of bond Discount (Credit Bond Discount) = Interest Expense - Interest payment | |||||||
Debit Balance in Bond Discount = Debit Balance in Bond Discount for previous period - Amortization of bond Discount | |||||||
Credit Balance in Bond Payable = Face value of bond | |||||||
Carrying value of Bond = Credit Balance in Bond Payable - Debit Balance in Bond Discount | |||||||
Period | Date | Interest payment | Interest Expense @ 2% | Amortization of bond Discount | Debit Balance in Bond Discount | Credit Balance in Bond Payable | Carrying value of Bond |
0 | $ 500 | $ 4,000 | $ 3,500 | ||||
1 | $ 100 | $ 70 | $ (30) | $ 530 | $ 4,000 | $ 3,470 | |
2 | $ 100 | $ 69 | $ (31) | $ 561 | $ 4,000 | $ 3,439 | |
3 | $ 100 | $ 69 | $ (31) | $ 592 | $ 4,000 | $ 3,408 | |
4 | $ 100 | $ 68 | $ (32) | $ 624 | $ 4,000 | $ 3,376 | |
5 | $ 100 | $ 68 | $ (32) | $ 656 | $ 4,000 | $ 3,344 | |
6 | $ 100 | $ 67 | $ (33) | $ 689 | $ 4,000 | $ 3,311 | |
7 | $ 100 | $ 66 | $ (34) | $ 723 | $ 4,000 | $ 3,277 | |
8 | $ 100 | $ 66 | $ (34) | $ 757 | $ 4,000 | $ 3,243 | |
9 | $ 100 | $ 65 | $ (35) | $ 793 | $ 4,000 | $ 3,207 | |
10 | $ 100 | $ 64 | $ (36) | $ 828 | $ 4,000 | $ 3,172 | |
11 | $ 100 | $ 63 | $ (37) | $ 865 | $ 4,000 | $ 3,135 | |
12 | $ 100 | $ 63 | $ (37) | $ 902 | $ 4,000 | $ 3,098 | |
13 | $ 100 | $ 62 | $ (38) | $ 940 | $ 4,000 | $ 3,060 | |
14 | $ 100 | $ 61 | $ (39) | $ 979 | $ 4,000 | $ 3,021 | |
15 | $ 100 | $ 60 | $ (40) | $ 1,019 | $ 4,000 | $ 2,981 | |
16 | $ 100 | $ 60 | $ (40) | $ 1,059 | $ 4,000 | $ 2,941 | |
17 | $ 100 | $ 59 | $ (41) | $ 1,100 | $ 4,000 | $ 2,900 | |
18 | $ 100 | $ 58 | $ (42) | $ 1,142 | $ 4,000 | $ 2,858 | |
19 | $ 100 | $ 57 | $ (43) | $ 1,185 | $ 4,000 | $ 2,815 | |
20 | $ 100 | $ 56 | $ (44) | $ 1,229 | $ 4,000 | $ 2,771 | |
21 | $ 100 | $ 55 | $ (45) | $ 1,273 | $ 4,000 | $ 2,727 | |
22 | $ 100 | $ 55 | $ (45) | $ 1,319 | $ 4,000 | $ 2,681 | |
23 | $ 100 | $ 54 | $ (46) | $ 1,365 | $ 4,000 | $ 2,635 | |
24 | $ 100 | $ 53 | $ (47) | $ 1,413 | $ 4,000 | $ 2,587 | |
How much should you sell it for (Your Answer) | $ 2,587 |
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