Description
Please follow the instructions below in the attached excel workbook:
INSTRUCTIONS |
1. Compute the amount received for the bonds. |
2. Compute the first interest and amortization amounts for the October 1, 2016, payment. |
3. Prepare journal entries for the issuance of the bonds and for the first interest payment. |
4. Compute the second interest and amortization amounts for the April 1, 2017, payment. |
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Explanation & Answer
See the attached solution.
This page has an explanation of calculating present value. When you are ready to solve the problem, click the Problem tab at
In this final week, we have one problem using the effective interest rate method.
In order to use this, we need to calculate time value of money. There are three ways
to go about this:
1. Use a table that is an appendix in most accounting books and is easily found by
conducting an Internet search for "amortization tables."
2. Use a mathematical formula.
3. Use an Excel present value formula.
Let's assume we want the present value of $5,000, which we will receive six months from now,
assuming an 8% interest rate. We know that the present value will be less than $5,000.
Using a table:
You can find a "present value of a lump sum" table by going to principlesofaccounting.com
and clicking "supplements" at the bottom-left of the screen. "Time...