Effective-interest amortization method Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate. In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium. Amortization Schedule: An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known. To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

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Answer 1

Question

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

2.

To determine

To Journalize: Issuance of the bonds.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Stone Company is facing several decisions regarding investing and financing activities. Address each decision independently. On June 30, 2024, the Stone Company purchased equipment from Paper Corporation. Stone agreed to pay $28,000 on the purchase date and the balance in five annual installments of $5,000 on each June 30 beginning June 30, 2025. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Stone value the equipment? Stone needs to accumulate sufficient funds to pay a $580,000 debt that comes due on December 31, 2029. The company will accumulate the funds by making five equal annual deposits to an account paying 5% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2024. On January 1, 2024, Stone leased an office building. Terms of the lease require Stone to make 10 annual lease payments of $138,000 beginning on January 1, 2024. A 10% interest rate…

Answer 2

Question

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

2.

To determine

To Journalize: Issuance of the bonds.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

2.

To determine

To Journalize: Issuance of the bonds.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

2.

To determine

To Journalize: Issuance of the bonds.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

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Answer 5

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

2.

To determine

To Journalize: Issuance of the bonds.

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 6

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

Answer 7

Chapter 12, Problem 12.16SE

1.

To determine

Effective-interest amortization method

Effective-interest amortization method it is an amortization model that apportions the amount of bond discount or premium based on the market interest rate.

In this method, first, interest expense is calculated based on the current carrying amount and market interest rate and cash interest payment is calculated based on the face value amount and stated interest rate and then, the different between the cash interest payment and interest expense is amortized as a decrease to the discount or premium.

Amortization Schedule:

An amortization schedule is a table that shows the details of each loan payment allocated between the principal amount and the overdue interest along with the beginning and ending balance of the loan. From the amortization schedule of the loan, the periodical interest expense, total interest expense and total payment made are known.

To prepare: An amortization table using the effective interest amortization method for the first two semiannual interest periods.

Answer 8

2.

To determine

To Journalize: Issuance of the bonds.

Answer 9

2.

To determine

To Journalize: Issuance of the bonds.

Answer 10

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

Answer 11

To determine

To Journalize: First semiannual interest payment and amortization of the bonds.

Answer 12

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 13

To determine

To Journalize: Second semiannual interest payment and amortization of the bonds.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 12 - Flipco signed a 10-year note payable on January 1,...Ch. 12 - Daniels's bonds payable carry a stated interest...Ch. 12 - A bond that matures in installments at regular...Ch. 12 - Prob. 4QC Ch. 12 - Nicholas Smith Fitness Gym has 700,000 of 20-year...Ch. 12 - Prob. 6QC Ch. 12 - Prob. 7QC Ch. 12 - The debt to equity ratio is calculated as a. Total...Ch. 12 - Mike Gordon wishes to have 80,000 in five years....Ch. 12 - Prob. 10BQC

Solution Summary: The author explains the effective-interest amortization method, which apportions the amount of bond discount or premium based on the market interest rate.

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To Journalize: Issuance of the bonds.

To Journalize: First semiannual interest payment and amortization of the bonds.

To Journalize: Second semiannual interest payment and amortization of the bonds.

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