Calculate the actual interest rate

Response to the following problem:

Wheaton Wholesalers Ltd. was authorized to issue $500,000 of face value bonds, as follows:

Date of authorization     January 1, 2017

Term                          3 years

Interest rate                12%

Interest payment dates Semi-annually on June 30 and December 31

On January 1, 2015, the corporation issued $200,000 of face value bonds for $210,152.


1. Calculate

a. The amount of interest paid every interest payment date.

b. The amount of amortization to be recorded at each interest payment date (use the straight-line method of amortization).

2. Prepare an amortization table showing beginning and ending bond carrying amounts over the three years.

3. Calculate the actual interest rate under the straight-line method of amortization for each six-month period.

4. Comment on the interest rate that results in each period. Do you think that this should vary from period to period? Why or why not?

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Cost Accounting: Calculate the actual interest rate
Reference No:- TGS02089950

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