On January 1,2015, Methodical Manufacturing issued 100 bonds, each with a face v
ID: 2574985 • Letter: O
Question
On January 1,2015, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 7 percent paid annually on December 31, and a maturity date of December 31, 2017 On the issue date, the market interest rate was 6.25 percent, so the total proceeds from the bond issue were $101,995. Methodical uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year Required: pare a bond amortization schedule. (Round your answers to the nearest whole dollar. Make sure that the Carrying value equals face value of the bond in the last period. Interest expense in the last period will result in the amount in Premium Amortized equaling Premium on Bonds Payable.) Ending Bond Liability Balances Bonds Payable Changes During the Period PremiumBonds Payable Premium on Carrying Value Period Interest Ended Expense Cash PaidAmon 100,000 S 100,000 100,000 10.000 101,995 100,000 100,000 10,000 01/01/15 1,995 S (6.250) 12/31/15 12/31/16 12/31/17 6.250Explanation / Answer
1. Premium Amortization Schedule :
Period Ended Interest Expense Cash Paid Premium Amortized Bonds Payable Premium on Bonds Payable Carrying Value $ $ $ $ $ $ 01/01/15 - - - 100,000 1,995 101,995 12/31/15 6,375 7,000 625 100,000 1,370 101,370 12/31/16 6,336 7,000 664 100,000 706 100,706 12/31/17 6,294 7,000 706 100,000 - 100,000