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1. ABC Company decides to use bonds as a method of debt financing. They issue 4.8%...

1. ABC Company decides to use bonds as a method of debt financing. They issue 4.8% bonds on October 1, 2021 with a face amount of $750,000 and a maturity date of September 30, 2024. The bonds pay interest semiannually March 31 and September 30. The market rate of interest is 4% Prepare an amortization table using the effective interest method related to the above. I would suggest inserting a table or Excel object into a Word document to prepare this.

In addition, what should ABC record related to these bonds at its fiscal year-end of December 31, 2022?

please attach excel sheet if possible

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Answer #1

ABC Company issued 4.8% Bonds for $750000 on 1st Oct, 2021.

Market rate of interest is 4%

Amortization Table of BONDS-

Date Opening Balance Addition Interest @ EIR Cash Interest Closing Balance
1st Oct, 2021 750000 - - 750000
31st March, 2022 750000 15000 18000 747000
30th September, 2022 747000 14940 17298 744012
31st March, 2023 744012 14880 17856 741036
30th September, 2023 741036 14821 17785 738072
31st March, 2024 738072 14761 17714 735119
30th September, 2024 735119 14702 17643 732178

Interest is calculated for half period in each of the columns.

For the Fiscal Year ended on 31 st December, 2022, ABC Company should record the following value of Bond in the books-

Value as on 30th September as shown in above table including 3 months Interest rate calculated at market rate of interest, shown as under

=744012 + 744012×4%×3/12 = $751452

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