Question

On June 1, 2019, Bramble Company sold $3,120,000 in long-term bonds for $2,736,600. 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 annually 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.(Please round interest expense and bond discount columns to zero decimal places.)

Answer 1

Solution:

Bond Amortization Schedule
Date	Cash Paid	Interest Expense	Discoount Amortized	Unamortized Discount	Carrying Value
1-Jun-19				$383,400	$2,736,600
31-May-20	$249,600	$273,660	$24,060	$359,340	$2,760,660
31-May-21	$249,600	$276,066	$26,466	$332,874	$2,787,126
31-May-22	$249,600	$278,713	$29,113	$303,761	$2,816,239
31-May-23	$249,600	$281,624	$32,024	$271,738	$2,848,262
31-May-24	$249,600	$284,826	$35,226	$236,511	$2,883,489
31-May-25	$249,600	$288,349	$38,749	$197,762	$2,922,238
31-May-26	$249,600	$292,224	$42,624	$155,139	$2,964,861
31-May-27	$249,600	$296,486	$46,886	$108,253	$3,011,747
31-May-28	$249,600	$301,175	$51,575	$56,678	$3,063,322
31-May-29	$249,600	$306,278	$56,678	$0	$3,120,000