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irakobra [83]
1 year ago
12

On January 1 of this year, Houston Company issued a bond with a face value of $ 10,000 and a coupon rate of 5 percent. The bond

matures in three years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 4 percent. Houston uses the effective-interest amortization method.
Required:
(b) What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2?
Business
1 answer:
denis-greek [22]1 year ago
7 0

A bond amortization schedule for all three years of the bond's life

principal     10,000      

 interest paid    500      

             

             

 principal use PV of $1 at 4% for 3 years      

             

 10000 * 0.889   = 8890    

             

             

 for interest use PV of an ordinary annuity      

             

 500 * 2.77509  = 1388    

 Issue price of bonds      10278    

             

           

2) 31-Dec   Year 1 Year 2      

             

 interest expense 411 408      

 bond liability  10189 10096  

Learn more about bonds here brainly.com/question/25965295

#SPJ4

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<em />

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