Amortization of Premium Stacy Company issued five-year, 9% bonds with a face val
ID: 2408477 • Letter: A
Question
Amortization of Premium
Stacy Company issued five-year, 9% bonds with a face value of $25,000 on January 1, 2016. Interest is paid annually on December 31. The market rate of interest of January 1, 2016, is 7% and the proceeds from the bond issuance equal $27,050.
Required:
1. Prepare a five-year table to amortize the premium using the effective interest method. Enter all amounts as positive numbers. If required, round all calculations and final answers to the nearest dollar.
*Note: Due to rounding you will have to adjust the interest expense DOWN to the nearest dollar 12/31/20.
Prepare the journal entry for the payment of interest and the amortization of premium on December 31, 2018 (the third year).
option: 1 and 2 :Bond expanse, bond payable, discount on bonds payable, interest expense, prepaid interest. 3: cash. interest expense, prepaid interest, bond expense, bond payable.
Stacy Company Premium Amortization Effective Interest Method of Amortization Cash Interest 9% Interest Expense 7% Premium Amortized Carrying Value Date 1/01/16 12/31/18 12/31/19 12/31/20 2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization? Interest expense Cash interest payment Premium amortizedExplanation / Answer
Part 1
1894
(27050*7%)
1869
(26694*7%)
1842
(26313*7%)
12/31/2019
12/31/2020
2250
2250
1813
(25905*7%)
1782
437
468
25468
25000
Part 2
Part 3
Part 4
Balance sheet
Date cash interest 9% interest expense 7% premium amortized carrying Value 1/01/2016 27050 12/31/2016 22501894
(27050*7%)
356 26694 12/31/2017 22501869
(26694*7%)
381 26313 12/31/2018 22501842
(26313*7%)
408 2590512/31/2019
12/31/2020
2250
2250
1813
(25905*7%)
1782
437
468
25468
25000
Total 11250 9200 2050Related Questions
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