Brief Exercise 9-4 Bramble Corp. invested in a three-year, $100 face value 9% bo

Question

Brief Exercise 9-4 Bramble Corp. invested in a three-year, $100 face value 9% bond, paying $95.12. At this price, the bond will yield a 11% return. Interest is payable annually Your answer is correct. Prepare a bond discount amortization table for Bramble Corp., assuming Bramble uses the effective interest method required by IFRS. (Round answers to 2 decimal places, e.g. 52.75.) Bond Discount Amortization Table Date Cash Received Interest Income Bond Discount Amortization Amortized Cost of Bond Day 1 95.12 End Year 1 10.46 1.46 96.58 End Year2 10.62 1.62 98.2 End Year 3 10.80 1.80 100 27 31.88 4.88 SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT

Explanation / Answer

Straight line amortization each year = Total discount over life of bond/ No. of years until maturity

= ($100 - $95.12)/ 3

= $4.88/ 3

= $1.62

Total interest income under:

Effective interest method = 10.46 + 10.62 + 10.80 = $31.88

Straight line method = 10.62 + 10.62 + 10.62 = $31.86

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