On January 1 2017 Novak Company sold 11 bonds having a matur

On January 1, 2017, Novak Company sold 11% bonds having a maturity value of $470,000 for $487,816, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2017, and mature January 1, 2022, with interest payable December 31 of each year. Novak Company allocates interest and unamortized discount or premium on the effective-interest basis.

Prepare a schedule of interest expense and bond amortization for 2017-2019. (Round answer to 0 decimal places, e.g. 38,548.) Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method Cash Paid Interest Expense Premium Amortized Carrying Amount of Bonds Date 12/31/17 12/31/18 12/31/19

Solution

Date Cash paid Interest expense Premium amortized Carrying amount of bonds 1/1/2017 487816 12/31/2017 51700 48782 2918 484898 12/31/2018 51700 48490 3210 481687 12/31/2019 51700 48169 3531 478156 The table for the balance two years will look a below: 12/31/2020 51700 47816 3884 474272 12/31/2021 51700 47427 4272 470000