Homework Answers
Requirement:
| IVANHOE COMPANY | ||||
| Bond premium amortization table | ||||
| Effective interest method-Annual interest payments | ||||
| 6% Bonds issued at market rate of 5% | ||||
| Date | Interest payment | Interest Expense | Premium amortization | Bond amortization |
| Jan.01 2021 | $ 784,558 | |||
| Jan.01 2022 | $ 45,120 | $ 38,608.40 | $ 6,511.60 | $ 778,046 |
| Jan.01 2023 | $ 45,120 | $ 38,608.40 | $ 6,511.60 | $ 771,535 |
| Jan.01 2024 | $ 45,120 | $ 38,608.40 | $ 6,511.60 | $ 765,023 |
| Jan.01 2025 | $ 45,120 | $ 38,608.40 | $ 6,511.60 | $ 758,512 |
| Jan.01 2026 | $ 45,120 | $ 38,608.40 | $ 6,511.60 | $ 752,000 |
Note:
Premium amortization = ($ 784,558 - $ 752,000)/5 = $ 6,511.60
Interest payment = $ 752,000 * 6% = $ 45,120
Interest expense = $45,120- $ 6,511.60 = $38,608.40
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