KIIaIRs People Window Help Chapter 10- Connect C ? ezto.mheducation.com/hm.tpx Q
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KIIaIRs People Window Help Chapter 10- Connect C ? ezto.mheducation.com/hm.tpx Questions 7-15 (or 15) | Save & Exit 11 Submit ? Time remaining: 2.3610 The following information applies to the questions displayed below) On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on December 31. The bonds mature at the end of four years. Olive uses the effective-interest amortization method. The partially completed amortization schedule below pertains to the bonds: Date Cash Interest Amortization Balance $ 58,998 58,771 58,530 January 1, Year 3.944 3,717 End of Year 1 End of Year 2 End of Year 3 End of Year 4 $ 227 257 3,671 58,000 Required information value 6.66 points Required 1. Complete the amortization schedule. (Enter all your values in positive. Round your final answers to nearest whole dollar amount.) Date January 1, Year 1 End of Year 1 End of Year 2 End of Year 3 End of Year 4 S 58,998 227 S 58,771 $ 58,530 3,944 $ 3,717 $ 257 3,671 $ 58,000 2Explanation / Answer
Part 1 – Amortization Table
Date
Cash
Interest
Amortization
(Cash - Interest)
Balance
(Beginning Bal - Amortization)
Jan.1, Year 1
$58,998
End of year 1
$3,944
$3,717
$227
$58,771
End of year 2
$3,944
$3,703
(3944 – 241)
$241
(58771 – 58530)
$58,530
End of year 3
$3,944
$3,687
(3944 – 257)
$257
$58,273
(58530 – 257)
End of year 4
$3,944
$3,671
$273
(58273 – 5800)
$58,000
Cash Payment of interest will remain same over the life of bond since it is paid on par value at stated rate of interest
Part 2 – Principal amount = $58,000 (i.e. par value of bond)
Part 3 – Cash Received is the issue price of the bond = $58,998
Part 4 – Bonds issued at Premium. Since the issue price $58,998 is higher than the par value $58,000
Premium on Bonds = $58,998 – 58,000 = $998
Part 5 –
Cash disbursed per period = $3,944
Cash disbursed in total = (3944*4) + Par value $58,000 - Cash received on issue of bond = $15,776 + 58,000 - 58,998 = $16,774
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Date
Cash
Interest
Amortization
(Cash - Interest)
Balance
(Beginning Bal - Amortization)
Jan.1, Year 1
$58,998
End of year 1
$3,944
$3,717
$227
$58,771
End of year 2
$3,944
$3,703
(3944 – 241)
$241
(58771 – 58530)
$58,530
End of year 3
$3,944
$3,687
(3944 – 257)
$257
$58,273
(58530 – 257)
End of year 4
$3,944
$3,671
$273
(58273 – 5800)
$58,000
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