Hillside issues $1,100,000 of 9%, 15-year bonds dated January 1, 2013, that pay

Question

Hillside issues $1,100,000 of 9%, 15-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,346,395.

Prepare the first two years of an amortization table using the straight-line method

Hillside issues $1,100,000 of 9%, 15-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,346,395.

Prepare the first two years of an amortization table using the straight-line method

Explanation / Answer

Bond premium = 1346395 - 1100000 =$ 246395

Amortization per semiannual month = [246395 / 15 ] *6/12 = 8213.17

A B C D E F G H year /periods Beginning Balance cash Interest(G*.045) Premium amortization Interest expense(C-D) Balance in premium account Face value Balance at end (F+G) 1 jan 2013 246395 1100000 1346395 30June 1346395 49500 8213.17 41286.83 238181.83 [246395-8213.17] 1100000 1338181.83 31 Dec 2013 1338181.83 49500 8213.17 41286.83 229968.66 [238181.83-8213.17] 1100000 1329968.66 30June2014 1329968.66 49500 8213.17 41286.83 221755.49   [229968.66-8213.17] 1100000 1321755.49 31Dec 2014 1321755.49 49500 8213.17 41286.83 213542.32 1100000 1313542.32

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