Using the effective interest amortization method

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Amortization of Premium or Discount Bonds payable are dated January 1, 2014, and are issued on that date. The face value of the bonds is $125,000, and the face rate of interest is 8%. The bonds pay interest semi annually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%.

Required:

Note: When computing the issue price of the bonds, round your answer to the nearest dollar. Then use the rounded amount in subsequent computations.

1. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period? Round your answers to the nearest cent. Amount amortized $ Amount of interest expense $

2. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2014? What amount of interest expense should be reported for the period from July 1 to December 31, 2014? Round your answers to the nearest cent.

Amount amortized $ Amount of interest expense $

Reference no: EM13933123

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