2. Bond computations: Straight-line amortization
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acchomework2.docx2. Bond computations: Straight-line amortization
Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.
· Case A—The bonds are issued at 100.
· Case B—The bonds are issued at 96.
· Case C—The bonds are issued at 105.
Southlake uses the straight-line method of amortization.
Instructions:
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Complete the following table: |
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Case A |
Case B |
Case C |
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a. Cash inflow on the issuance date |
_______ |
_______ |
_______ |
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b. Total cash outflow through maturity |
_______ |
_______ |
_______ |
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c. Total borrowing cost over the life of the bond issue |
_______ |
_______ |
_______ |
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d. Interest expense for the year ended December 31, 20X1 |
_______ |
_______ |
_______ |
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e. Amortization for the year ended December 31, 20X1 |
_______ |
_______ |
_______ |
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f. Unamortized premium as of December 31, 20X1 |
_______ |
_______ |
_______ |
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g. Unamortized discount as of December 31, 20X1 |
_______ |
_______ |
_______ |
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h. Bond carrying value as of December 31, 20X1 |
_______ |
_______ |
_______ |
