Question

Current Attempt in Progress Bramble Industries, Inc. issued $15,900,000 of 8% debentures on May 1, 2020 and received cash totaling $14,107,479. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2025. The firm uses the effective interest method of amortizing discounts and premiums. The bonds were sold to yield an effective-interest rate of 10%. Calculate the total dollar amount of discount or premium amortization during the first year (5/1/20 through 4/30/21) these bonds were outstanding. (Round answers to 0 decimal places, e.g. 5,275.) Interest Expense Cash Interest Discount Amortized Carrying Value of Bonds Date 5/1/20 $ 11/1/20 $ $ $ 5/1/21 Total $ e Textbook and Media Save for Later Attempts: 1 of 2 used Submit Answer

Answer 1

Working Notes:
	Calculation of Discount amount and half yearly coupon rate
		Par Value of the Bonds =	$                 1,59,00,000
		Issued price	$                 1,41,07,479
		Discount to be amortized	$                     17,92,521
		Rate of interest of Coupon	8%
		Yearly Coupon Amount	$                     12,72,000
		Half yearly coupon amount =	$                       6,36,000
		Market Rate of interest =	10%
		Half yearly interest rate = 10 % / 2 =	5.00%
Solution:
	Schedule of Interest revenue and bond premium Amortization
	Effective interest Method
	Date	Interest Expenses @ 5.00% on Carrying Amount	Cash Paid	Discount Amortized	Caryying Value of Bonds
	5/1/20				$       1,41,07,479
	11/1/20	$                                                                7,05,374	$                       6,36,000	$                69,374	$       1,41,76,853
	5/1/21	$                                                                7,08,843	$                       6,36,000	$                72,843	$       1,42,49,696
		Total		$             1,42,217