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E10-24A Pitre Incorporated

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Exercise 10-24A Effective interest amortization for a bond premium
On January 1, 2013, Pitre Incorporated issued bonds with a face value of $120,000 a stated
rate of interest of 8% and a five-year term to maturity. Interest is payable in cash on
December 31 of each year. The effective rate of interest was 7% at the time the bonds were
issued. The bonds sold for $124,920 Pitre used the effective interest rate method to amortize
bond discount.

a. Prepare an amortization table as shown below:
b. What item(s) in the table would appear on the 2015 balance sheet?
c. What item(s) in the table would appear on the 2015 income statement?
d. What item(s) in the table would appear on the 2015 statement of cash flows?

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