Bond computations: Straight-line amortization
Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.
- Case A-The bonds are issued at 100.
- Case B-The bonds are issued at 96.
- Case C-The bonds are issued at 105.
Southlake uses the straight-line method of amortization.
Instructions:
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Complete the following table:
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Case A
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Case B
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Case C
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- Cash inflow on the issuance date
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- Total cash outflow through maturity
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- Total borrowing cost over the life of the bond issue
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- Interest expense for the year ended December 31, 20X1
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- Amortization for the year ended December 31, 20X1
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- Unamortized premium as of December 31, 20X1
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- Unamortized discount as of December 31, 20X1
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- Bond carrying value as of December 31, 20X1
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