Prima,Inc.issued 15-year bonds with a face value of $50,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 6% and sold for $54,856.38.
Required:
a.Complete the amortization schedule for the first two years of the bond issue using the effective interest method.
b.Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
c.Fill in the correct dollar amounts:
At maturity,after the last interest payment has been made,the unamortized premium on the bonds will be $______________ and the carrying value of the bonds will be $_______________.

Question

Prima,Inc.issued 15-year bonds with a face value of $50,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 6% and sold for $54,856.38.
Required:
a.Complete the amortization schedule for the first two years of the bond issue using the effective interest method.
  b.Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
  c.Fill in the correct dollar amounts:
At maturity,after the last interest payment has been made,the unamortized premium on the bonds will be $______________ and the carrying value of the bonds will be $_______________.

Quizplus · Accepted Answer

The Answer of Prima,Inc.issued 15-year bonds with a face value of $50,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 6% and sold for $54,856.38.
Required:
a.Complete the amortization schedule for the first two years of the bond issue using the effective interest method.
  b.Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
  c.Fill in the correct dollar amounts:
At maturity,after the last interest payment has been made,the unamortized premium on the bonds will be $______________ and the carrying value of the bonds will be $_______________.

Prima,IncIssued 15-Year Bonds with a Face Value of $50,000