Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Amortization of Premium Stacy Company issued five-year, 9% bonds with a face val

ID: 2408477 • Letter: A

Question

Amortization of Premium

Stacy Company issued five-year, 9% bonds with a face value of $25,000 on January 1, 2016. Interest is paid annually on December 31. The market rate of interest of January 1, 2016, is 7% and the proceeds from the bond issuance equal $27,050.

Required:

1. Prepare a five-year table to amortize the premium using the effective interest method. Enter all amounts as positive numbers. If required, round all calculations and final answers to the nearest dollar.

*Note: Due to rounding you will have to adjust the interest expense DOWN to the nearest dollar 12/31/20.

Prepare the journal entry for the payment of interest and the amortization of premium on December 31, 2018 (the third year).

option: 1 and 2 :Bond expanse, bond payable, discount on bonds payable, interest expense, prepaid interest. 3: cash. interest expense, prepaid interest, bond expense, bond payable.

Stacy Company Premium Amortization Effective Interest Method of Amortization Cash Interest 9% Interest Expense 7% Premium Amortized Carrying Value Date 1/01/16 12/31/18 12/31/19 12/31/20 2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization? Interest expense Cash interest payment Premium amortized

Explanation / Answer

Part 1

1894

(27050*7%)

1869

(26694*7%)

1842

(26313*7%)

12/31/2019

12/31/2020

2250

2250

1813

(25905*7%)

1782

437

468

25468

25000

Part 2

Part 3

Part 4

Balance sheet

Date cash interest 9% interest expense 7% premium amortized carrying Value 1/01/2016 27050 12/31/2016 2250

1894

(27050*7%)

356 26694 12/31/2017 2250

1869

(26694*7%)

381 26313 12/31/2018 2250

1842

(26313*7%)

408 25905

12/31/2019

12/31/2020

2250

2250

1813

(25905*7%)

1782

437

468

25468

25000

Total 11250 9200 2050
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
Chat Now And Get Quote