Question Details

Prepare a bond discount amortization schedule which shows the amortization 


a Ex. 1
Wenger Corporation is issuing €500,000 of 8%, 5-year bonds when potential bond investors want a return of 10%. Interest is payable semiannually. The present value of 1 factors are 4%, .67556 and 5%, .61391. The present value of an annuity factors are 4%, 8.1109 and 5%, 7.72173.

Instructions
Compute the market price (present value) of the bonds.


a Ex. 2
On January 1, 2011, Potter Corporation issued $800,000, 9%, 5-year bonds for $769,112. The bonds were sold to yield an effective-interest rate of 10%. Interest is paid semiannually on June 30 and December 31. The company uses the effective-interest method of amortization.

Instructions
(a)	Prepare a bond discount amortization schedule which shows the amortization of discount for the first two interest payment dates. (Round to the nearest dollar.)
(b)	Prepare the journal entries that Potter Corporation would make on January 1, June 30, and December 31, 2011, related to the bond issue.





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