Chapter 8
Non-Current Liabilities
418
AP-10B (
4
)
On July 1, 2016, Den Inc. issued a seven-year, 10% bond of $500,000 for the discount price of
$453,525. Interest is to be paid semi-annually on June 30 and December 31. The company’s
year-end is July 31. Prepare an amortization schedule for the first four interest periods. Assume
the market rate of interest was 12% on the issuance date.
Semi-Annual
Interest Period
A
B
C
D
Interest Payment Interest Expense
Premium
Amortization
Bond Amortized
Cost
Analysis
Explain if the total cash payment for interest would be different from the total interest
expenses recorded over the term of the bonds in this question.
