Assume that a bond is issued with the following characteristics Date of bonds: J

Question

Assume that a bond is issued with the following characteristics Date of bonds: January 1, 2005; maturity date: January 1, 2010: face vue: 3200,000; face interest rate: 10 percent pald smlannually (5 percent per period); market interest rate: 8 percent (4 percent per emiannual period]; issue price 5216,222, bond premium is amortized using the effectiva interest method of amortization What is the amount af band premium amortization for the Junen 30, 2005, adjusting entry? $1,351 $2 702 hs cie $8649 $10,000

Explanation / Answer

Bond premium amortization :

Interest paid = (200000*5%) = 10000

Interest expenses = (216222*4%) = 8649

Amortization of premium = (10000-8649) = 1351

so answer is a) $1351

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