MBA560 Financial and Managerial Accounting: Module 4 E7-38 On January 1, 2012, Crume Incorporated

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MBA560 Financial and Managerial Accounting
Module 4 Homework

Exercise 7-38 Effective interest amortization for a bond premium
On January 1, 2012, Crume Incorporated issued bonds with a face value of $100,000, a stated rate of interest of 9 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 8 percent at the time the bonds were issued. The bonds sold for $103,993. Crume used the effective interest rate method to amortize bond discount.

Required
a. Prepare an amortization table as shown below 7-38 template on the excel sheet:
Cash Payment Interest Expense Premium Amortization Carrying Value
January 1, 2012 103,993
December 31, 2012 9,000 8,319 681 103,312
December 31, 2013 ? ? ? ?
December 31, 2014 ? ? ? ?
December 31, 2015 ? ? ? ?
December 31, 2016 ? ? ? ?
Totals 45,000 41,007 3,993
b. What item(s) in the table would appear on the 2014 balance sheet?
c. What item(s) in the table would appear on the 2014 income statement?
d. What item(s) in the table would appear on the 2014 statement of cash flows?
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