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Check my work On January 1, 2017, SONOB Company issues 16%, $5,000,000 4-year bonds and the bonds pay interest quarterly on M
2. Prepare a partial amortization table only for the first 2 years using the table given below А в INTEREST DATE INTEREST PAI
3. Prepare journal entries to record the following: (a) Payment of interest on June 30, 2018 (b) Due to high interest rates i
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Answer #1
Table values are based on:
n= 16
i= 4.0%
Cash Flow Amount Present Value
Interest $5,000,000*4% =$200,000 $200,000*PVAF(3%,16) =$200,000*12.56110 =$2,512,220
Principal $5,000,000 $5,000,000*PVIF(2.50%,10) =$5,000,000*0.62317 =$3,115,850
Price of Bonds $5,628,070
Premium on bonds =$5,628,070 - $5,000,000 =$628,070
Amortization table
Col I Col II Col III Col IV
Date Interest Payment($5,000,000*4%) Interest expenses(Col IV*3%) Premium amorrtization(Col I -Col II) Bond carrying amount
01-Jan-17                    56,28,070
31-Mar-17                                             2,00,000                                                                        1,68,842                                              31,158                    55,96,912
30-Jun-17                                             2,00,000                                                                        1,67,907                                              32,093                    55,64,819
30-Sep-17                                             2,00,000                                                                        1,66,945                                              33,055                    55,31,764
31-Dec-17                                             2,00,000                                                                        1,65,953                                              34,047                    54,97,717
31-Mar-18                                             2,00,000                                                                        1,64,932                                              35,068                    54,62,648
30-Jun-18                                             2,00,000                                                                        1,63,879                                              36,121                    54,26,528
30-Sep-18                                             2,00,000                                                                        1,62,796                                              37,204                    53,89,324
31-Dec-18                                             2,00,000                                                                        1,61,680                                              38,320                    53,51,003
31-Mar-19                                             2,00,000                                                                        1,60,530                                              39,470                    53,11,534
30-Jun-19                                             2,00,000                                                                        1,59,346                                              40,654                    52,70,880
Date Accounts and explanation Debit(in $) Credit(in $)
30-Jun-18 Interest Expenses                                           1,63,879
Premium on issue of Bond                                              36,121
      Cash                      2,00,000
31-Dec-20 Bonds Payable                                         50,00,000
Premium on Bonds                                           2,70,880
Cash                    46,50,000
Gain on retirement of Bonds                      6,20,880
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