Question

Required information (The following information applies to the questions displayed below.] On January 1, when the market interest rate was 10 percent, Seton Corporation completed a $290,000, 9 percent bond issue for $272,169. The bonds pay interest each December 31 and mature in 10 years. Seton amortizes the bond discount using the straight-line method. 3. Prepare a bond discount amortization schedule for these bonds. (Do not round intermediate calculations. Round your answers to the nearest dollar.) Changes During the Period Ending Bond Liability Balances Period Ended Cash Paid Discount Amortized Interest Expense Bonds Payable Discount on Bonds Payable Carrying Value Start Yr 1 End Yr 2 End Yr 3 End Yr 4 End Yr 5 End Yr 6 End Yr 7 End Yr 8 End Yr 9 End Yr 10 End

Answer 1

Correct Answer:

Effective Interest Amortization Table
Formula Used	(290,000*9%)	Last year’s Carrying value of bond* Market Rate of Interest (10%)	Interest Expense - Cash Paid	$ 290,000	Unamortized discount - Discount amortized		Last year's Carrying value of Bond - current year's Premium amortized
	Changes During the period			Ending liability balance
Date	cash paid	Interest Expense	Discount Amortized	bond payable	unamortized discount	Carrying value of Bond
Start		-	-	$                 290,000	$                        17,831	$                 272,169
Year 1 End	$                         26,100.0	$           27,217	$                      1,117	$                 290,000	$                        16,714	$                 273,286
Year 2 End	$                         26,100.0	$           27,329	$                      1,229	$                 290,000	$                        15,486	$                 274,514
Year 3 End	$                         26,100.0	$           27,451	$                      1,351	$                 290,000	$                        14,134	$                 275,866
Year 4 End	$                         26,100.0	$           27,587	$                      1,487	$                 290,000	$                        12,647	$                 277,353
Year 5 End	$                         26,100.0	$           27,735	$                      1,635	$                 290,000	$                        11,012	$                 278,988
Year 6 End	$                         26,100.0	$           27,899	$                      1,799	$                 290,000	$                          9,213	$                 280,787
Year 7 End	$                         26,100.0	$           28,079	$                      1,979	$                 290,000	$                          7,235	$                 282,765
Year 8 End	$                         26,100.0	$           28,277	$                      2,177	$                 290,000	$                          5,058	$                 284,942
Year 9 End	$                         26,100.0	$           28,494	$                      2,394	$                 290,000	$                          2,664	$                 287,336
Year 10 End	$                         26,100.0	$           28,764	$                      2,664	$                 290,000	$                                   0	$                 290,000

End of answer.

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