7 On January 1 2016 a company issues 3year bonds with a face

7. On January 1. 2016, a company issues 3-year bonds with a face value of $240,000 and a stated interest rate of 7%. Because the market nterest rate is 5%, the company receives S253070 for the bonds. Required Fil in the table assuning the company uses efective-interest bond amortization, (Round your answers to the nearest whole dollar) Table Cash Paid Expense Premium Payable Bonds Payable Value 0101/2010 1231/2010 1231/2017 1231/2018

Solution

Period Ended

Cash paid

Interest expense

Amortized premium

Bonds Payable

Premium on Bonds payable

Carrying Value

01/01/2016

240000

13070

253070

12/31/2016

240000*7% = 16800

253070*5% = 12654

16800 - 12654 = 4146

240000

13070 - 4146 = 8924

240000 + 8924 = 248924

12/31/2017

240000*7% = 16800

248924*5% = 12446

16800 - 12446 = 4354

240000

8924 -4354= 4570

240000 +4570 = 244570

12/31/2018

240000*7% = 16800

244570*5% = 12229

16800 – 12229 = 4571

240000

4570 -4571 = 0 (approx)

240000

Period Ended	Cash paid	Interest expense	Amortized premium	Bonds Payable	Premium on Bonds payable	Carrying Value
01/01/2016				240000	13070	253070
12/31/2016	240000*7% = 16800	253070*5% = 12654	16800 - 12654 = 4146	240000	13070 - 4146 = 8924	240000 + 8924 = 248924
12/31/2017	240000*7% = 16800	248924*5% = 12446	16800 - 12446 = 4354	240000	8924 -4354= 4570	240000 +4570 = 244570
12/31/2018	240000*7% = 16800	244570*5% = 12229	16800 – 12229 = 4571	240000	4570 -4571 = 0 (approx)	240000