Solution B: | ||
Bond interest expense for the first year = Interest paid + Discount amortized | ||
Annual Interest Paid | $ 3,500,000.00 | |
Add: Discount Amortized | $ 423,959.00 | =207315+216644 |
Interest Expense for the year | $ 3,923,959.00 |
There was difference in answer due to rounding off.
Working:
Year | Beginning Balance | Interest Expense | Interest Payment | Discount Amortized | Unamortized Discount | Ending Balance |
1 Jan | $ (6,504,105) | $43,495,895 | ||||
30 June | $ 43,495,895 | $ 1,957,315.00 | $ 1,750,000 | $ (207,315) | $ (6,296,790) | $43,703,210 |
31 Dec | $ 43,703,210 | $ 1,966,644.00 | $ 1,750,000 | $ (216,644) | $ (6,080,146) | $43,919,854 |
Total | $ 3,923,959 | $ 3,500,000 | $ (423,959) |
Since only (b) part of the question is asked to be answered , the same have been done.
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