On june 1, 2013, Everly Bottle Company sold $2,000,000 in long-term bonds for $1

Question

On june 1, 2013, Everly Bottle Company sold $2,000,000 in long-term bonds for $1,754,200 The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10% The bonds pay interest annualy on May 31 of each year. The bonds are to be accounted for under the effective-interest method. Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31. Indude only the first four years. Make sure all columns and rows are properly labeled. (Round to the nearest dollar.)

Explanation / Answer

A B C D E F G Year Interest Payment @8% on Face Value Interest Expense @10% of Previous G in Book Value Amortization of Bond (C-B) Debit Balance in the Account Bond Discount Credit Balance in the Account Bonds payable Book Value of the Bonds (F-E) 0 245800 2000000 1754200 1 160000 175420.00 15420.00 230380.00 2000000.00 1769620.00 2 160000 176962.00 16962.00 213418.00 2000000.00 1786582.00 3 160000 178658.20 18658.20 194759.80 2000000.00 1805240.20 4 160000 180524.02 20524.02 174235.78 2000000.00 1825764.22 5 160000 182576.42 22576.42 151659.36 2000000.00 1848340.64 6 160000 184834.06 24834.06 126825.29 2000000.00 1873174.71 7 160000 187317.47 27317.47 99507.82 2000000.00 1900492.18 8 160000 190049.22 30049.22 69458.61 2000000.00 1930541.39 9 160000 193054.14 33054.14 36404.47 2000000.00 1963595.53 10 160000 196359.55 36359.55 44.91 2000000.00 1999955.09

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