31. The bonds mature at the end of four years. Olive uses the effective-interest on method. The partially completed amortization schedule below pertains to t
31. The bonds mature at the end of four years. Olive uses the effective-interest on method. The partially completed amortization schedule below pertains to t
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Preparing a Bond Amortization Schedule
answer 4-6 please
![On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on
December 31. The bonds mature at the end of four years. Olive uses the effective-interest
amortization method. The partially completed amortization schedule below pertains to the bonds:
Date
Cash
Interest Amortization Balance
January 1, Year 1
$48,813
End of Year 1
$3,600
$3,417
$183
48,630
End of Year 2
?
48,434
End of Year 3
?
210
?
End of Year 4
3,376
48,000
Required:
1. Complete the amortization schedule.
2. When the bonds mature at the end of Year 4, what amount of principal will Olive pay investors?
3. How much cash was received on the day the bonds were issued (sold)?
4. Were the bonds issued at a premium or a discount? If so, what was the amount of the premium or
discount?
5. How much cash will be disbursed for interest each period and in total over the life of the bonds?
6. What is the coupon rate?
7. What was the annual market rate of interest on the date the bonds were issued?
8. What amount of interest expense will be reported on the income statement for Year 2 and Year 3?
9. What amount will be reported on the balance sheet at the end of Year 2 and Year 3?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9f50a71f-8223-44c7-add6-dd8242c61e46%2F6d0f74b9-00b2-4012-81da-3acd74dd014f%2F0ehj13_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1 of this year, Olive Corporation issued bonds. Interest is payable once a year on
December 31. The bonds mature at the end of four years. Olive uses the effective-interest
amortization method. The partially completed amortization schedule below pertains to the bonds:
Date
Cash
Interest Amortization Balance
January 1, Year 1
$48,813
End of Year 1
$3,600
$3,417
$183
48,630
End of Year 2
?
48,434
End of Year 3
?
210
?
End of Year 4
3,376
48,000
Required:
1. Complete the amortization schedule.
2. When the bonds mature at the end of Year 4, what amount of principal will Olive pay investors?
3. How much cash was received on the day the bonds were issued (sold)?
4. Were the bonds issued at a premium or a discount? If so, what was the amount of the premium or
discount?
5. How much cash will be disbursed for interest each period and in total over the life of the bonds?
6. What is the coupon rate?
7. What was the annual market rate of interest on the date the bonds were issued?
8. What amount of interest expense will be reported on the income statement for Year 2 and Year 3?
9. What amount will be reported on the balance sheet at the end of Year 2 and Year 3?
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