Question

On January 1 of this year, luta Company issued a bond with a face value of $300,000 and a coupon rate of 5 percent. The bond matures in 31. When the bond was issued the annual market rate of interest was 6 percent kuta uses the effectivenest amortization methode Use the appropriate factors) from the tables provided. Round your final answer to whole dollars.) 51 P and a r e very December 51 EVA 51 and VA 50 Required: 1. Complete a bond amortization schedule for all three years of the band's ite Date Cash Interest Interest Expense Discount Amortization Book Value of Bond Jan 01 Year 31. Yet (Doc 31. Your 2 Dec 31 Year 3

Answer 1

Solution 1:

Computation of bond price
Table values are based on:
n=	3
i=	6.00%
Cash flow	Table Value	Amount	Present Value
Par (Maturity) Value	0.83962	$300,000.00	$251,886
Interest (Annuity)	2.67301	$15,000.00	$40,095
Present value of bonds			$291,981

Bond Amortization Schedule - Effective interest method
Date	Cash Paid	Interest Expense	Discount Amortization	Book value of bond
Jan 1, Year 1				$291,981
Dec 31, Year 1	$15,000	$17,519	$2,519	$294,500
Dec 31, Year 2	$15,000	$17,670	$2,670	$297,170
Dec 31, Year 3	$15,000	$17,830	$2,830	$300,000