Refer to the bond details in Problem 14-3B.
Required
1. Compute the total bond interest expense over the bonds’ life.
2. Prepare an effective interest amortization table like the one in Exhibit 14B.2 for the bonds’ life.
3. Prepare the journal entries to record the first two interest payments.
4. Use the market rate at issuance to compute the present value of the remaining cash flows for these
bonds as of December 31, 2011. Compare your answer with the amount shown on the amortization
table as the balance for that date (from part 2) and explain your findings.
Problem 14-3B.
San Mateo Company issues 7%, five-year bonds dated January 1, 2009, with a $220,000 par value. The
bonds pay interest on June 30 and December 31 and are issued at a price of $229,385. Their annual market
rate is 6% on the issue date.
Required
1. Calculate the total bond interest expense over the bonds’ life.
2. Prepare a straight-line amortization table like Exhibit 14.11 for the bonds’ life.
3. Prepare the journal entries to record the first two interest payments.
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