Bush Company authorized $150,000 of 5-year bonds dated January 1, 20X1. The stated rate of interest was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 20X1, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for five periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar.
(a) What would be the amount of premium amortization for June 30, 20X1?
(b) What would be the amount of premium amortization for December 31, 20X1?
(c) What would be the amount of the interest payment on June 30, 20X1?
(d) What would be the amount of the interest payment on December 31, 20X1?

Question

Bush Company authorized $150,000 of 5-year bonds dated January 1, 20X1. The stated rate of interest was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 20X1, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for five periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar. 
(a) What would be the amount of premium amortization for June 30, 20X1? 
(b) What would be the amount of premium amortization for December 31, 20X1? 
(c) What would be the amount of the interest payment on June 30, 20X1?
 (d) What would be the amount of the interest payment on December 31, 20X1?

Quizplus · Accepted Answer

The Answer of Bush Company authorized $150,000 of 5-year bonds dated January 1, 20X1. The stated rate of interest was 14%, payable each June 30 and December 31. The bonds were issued on January 1, 20X1, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for five periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar. 
(a) What would be the amount of premium amortization for June 30, 20X1? 
(b) What would be the amount of premium amortization for December 31, 20X1? 
(c) What would be the amount of the interest payment on June 30, 20X1?
 (d) What would be the amount of the interest payment on December 31, 20X1?

Bush Company Authorized $150,000 of 5-Year Bonds Dated January 1