Effective interest amortization of a bond discount
On January 1, 2012, Woodland Enterprises issued bonds with a face value of $50,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 10 percent at the time the bonds were issued. The bonds sold for $46,209. Woodland used the effective interest rate method to amortize bond discount.
Required
a. Prepare an amortization table as shown below:
| Cash Payment | Interest Expense | Discount Amortization | Carrying Value |
January 1, 2012 |
|
|
| 46,209 |
December 31, 2012 | 4,000 | 4,621 | 621 | 46,830 |
December 31, 2013 | ? | ? | ? | ? |
December 31, 2014 | ? | ? | ? | ? |
December 31, 2015 | ? | ? | ? | ? |
December 31, 2016 | ? | ? | ? | ? |
Totals | 20,000 | 23,791 | 3,791 |
|
b. What item(s) in the table would appear on the 2013 balance sheet?
c. What item(s) in the table would appear on the 2013 income statement?
d. What item(s) in the table would appear on the 2013 statement of cash flows?
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