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Sandhill Co. sold $3,300,000, 7%, 10-year bonds on January 1, 2017. The bonds were dated January...

Sandhill Co. sold $3,300,000, 7%, 10-year bonds on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on January 1. The company uses straight-line amortization on bond premiums and discounts. Financial statements are prepared annually.

(B) Prepare amortization table for issuance of the bonds sold at 104 for the first three interest payments.

Prepare amortization table for issuance of the bonds sold at 97 for the first three interest payments.

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Answer #1

a) Issue price = 3300000*1.04 = 3432000

Premium on bonds payable = 3432000-3300000 = 132000

Period Interest paid Amortization of premium Interest expense Unamortized premium Carrying value
0 132000 3432000
1 3300000*7% = 231000 132000/10 = 13200 231000-13200 = 217800 118800 3418800
2 231000 13200 217800 105600 3405600
3 231000 13200 217800 92400 3392400

b) Issue price = 3300000*0.97 = 3201000

Discount on bonds payable = 3201000-3300000 = 99000

Period Interest paid Amortization of Discount Interest expense Unamortized discount Carrying value
0 99000 3201000
1 3300000*7% = 231000 99000/10 = 9900 231000+9900 = 240900 89100 3210900
2 231000 9900 240900 79200 3220800
3 231000 9900 240900 69300 3230700
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