On December 31, 2013, Drew Company issued $350,000, 5-year bonds for $320,000. T

Question

On December 31, 2013, Drew Company issued $350,000, 5-year bonds for $320,000. The stated rate of interest was 7% and interest is paid annually on December 31. Required: Hide Prepare the amortization table for Drew Company's bonds. If an amount box does not require an entry, leave it blank or enter "0". Drew Company Amortization Table Period Cash Payment (Credit) Interest Expense (Debit) Discount on Bonds Payable (Credit) Discount on Bonds Payable Balance Carrying Value At issue $ $ $ $ $ 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18

Explanation / Answer

Bond Amortization Table

Current Price of Bond 320000 Years to maturity 5 FaceValue of bond/Maturity Value 350000 Coupon rate 7.00% Coupon: (320000*7%) 24500 Approximate YTM under Best assumption (Coupon Interest+((MV-PV)/Remaining Life))/ ((MV+PV)/2) (24500+((350000-320000)/5))/((350000+320000)/2) = 9.10% Present Value is 320000 at 9.216%

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