| Straight Line vs Effective Interest Amortization Methods |
| Ranger Co. issues bonds dated January 1, information about the bonds is below. Interest is paid semiannually on June 30 and December 31. |
| Par | 850,000 |
| Rate | 12% |
| Term | 3 |
| Market Rate | 10% |
| Issue Price | 893,131 |
| Semi annual interest | 51,000 |
| 1. What is the amount of the premium on these bonds at issuance? |
| Issue Price |
| Par |
| premium |
| premium amoritized per period |
| 2. How much total bond interest expense will be recognized over the life of these bonds? |
| Total Bond Interest Expense Over Life of Bonds: |
| Amount repaid: |
| payments of |
| Par value at maturity |
| Total repaid |
| Less amount borrowed |
| Total bond interest expense |
| 3. Prepare a straight-line amortization table for these bonds. |
| Semiannual Interest Period-End | Unamortized Premium | Carrying Value |
| 1/1 yr 1 |
| 6/30 yr 1 |
| 1/1 yr 2 |
| 6/30 yr 2 |
| 1/1/ yr 3 |
| 6/30 yr 3 |
| 12/31 yr 3 |
| 3. Prepare an effective Interest: amortization of these bonds. |
| Semiannual Interest Period-End | Cash Interest Paid | Bond Interest Expense | Premium Amorization | Unamoritzed Premium | Carrying Value |
| 1/1 yr 1 |
| 6/30 yr 1 |
| 1/1 yr 2 |
| 6/30 yr 2 |
| 1/1/ yr 3 |
| 6/30 yr 3 |
| 12/31 yr 3 |
| Total |
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AC216Unit4Assignment5-Amortization.xlsx
