bond computations straight line amortization 286583

Aug 29, 2021 | Uncategorized

Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.

· Case A—The bonds are issued at 100.

· Case B—The bonds are issued at 96.

· Case C—The bonds are issued at 105.

Southlake uses the straight line method of amortization.

Instructions:

Complete the following table:

Case A

Case B

Case C
  1. Cash inflow on the issuance date

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  1. Total cash outflow through maturity

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  1. Total borrowing cost over the life of the bond issue

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  1. Interest expense for the year ended December 31, 20X1

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  1. Amortization for the year ended December 31, 20X1

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  1. Unamortized premium as of December 31, 20X1

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  1. Unamortized discount as of December 31, 20X1

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  1. Bond carrying value as of December 31, 20X1

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