Premium and discount amortization
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Ex. 14-104—Amortization of discount or premium. Benson Industries, Inc. issued $6,000,000 of 8% debentures on May 1, 2006 and received cash totaling $5,323,577. The bonds pay interest semiannually on May 1 and November 1.
[DOC File]CHAPTER 10
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A bond premium, like a bond discount, is allocated to expense in each period in which the bonds are outstanding. This is referred to as amortizing the premium. Amortization of the premium decreases the amount of interest expense reported each period. That is, the amount of interest expense reported in a period will be less than the contractual ...
[DOC File]Long term liabilities
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The interest expense and discount or premium amortization each period can be calculated using amortization tables as follows. Assume that 10%, 10-year bonds with a face value of $10,000 were issued on January 1, 2002, when the market rate is 12%. The bonds will sell (as shown previously) for a discount, and the selling price will be $8,870 ...
[DOC File]Chapter 3
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Discount and premium amortization Requirement 1: The carrying values of both bonds in each of the two years presented is simply the present value of the principal and interest payments discounted over the remaining life of the bond.
[DOCX File]Chapter 10
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Under effective-interest amortization, the amount of premium or discount amortized is different each period. Effective-interest amortization of bond premium and discount correctly measures the current cash equivalent amount of the bonds and the interest expense reported on the income statement based on the issuance entry.
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Calculate the total dollar amount of discount or premium amortization during the first year (5/1/10 through 4/30/11) these bonds were outstanding. (Show computations and round to the nearest dollar.) Solution 14-119. Interest Cash Discount Carrying. Date Expense Interest Amortized Value of Bonds.
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