Question

Quatro Co. issues bonds dated January 1, 2016, with a par value of $790,000. The bonds’ annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $810,694. 3. Prepare an amortization table for these bonds; use the straight-line method to amortize the premium. (Round your intermediate calculations to the nearest dollar amount.)

Answer 1

Bond premium amortization table using straight line method
Date	Interest payment [4.5% * $790000]	Interest Expense (B-D)	Amortization of bond premium [$20694/6 ]	Credit balance in Bond Premium account	Credit balance in Bond Payable account	Book value of the bond
A	B	C	D	E	F	G
Jan.1,2016				$20,694	$790,000	$810,694
June 30,2016	$35,550	$32,101	$3,449	$17,245	$790,000	$807,245
Dec.31,2016	$35,550	$32,101	$3,449	$13,796	$790,000	$803,796
June 30,2017	$35,550	$32,101	$3,449	$10,347	$790,000	$800,347
Dec.31,2017	$35,550	$32,101	$3,449	$6,898	$790,000	$796,898
June 30,2018	$35,550	$32,101	$3,449	$3,449	$790,000	$793,449
Dec.31,2018	$35,550	$32,101	$3,449	$0	$790,000	$790,000