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Amortization of Premium

Assume the same set of facts for Ortega Company as in Problem 10-2A except that the market rate of interest of January 1, 2014, is 4% and the proceeds from the bond issuance equal $52,227.

Required

1. Prepare a five-year table (similar to Exhibit 10-5) to amortize the premium using the effec- tive interest method.

2. What is the total interest expense over the life of the bonds? cash interest payment? premium amortization?

3. Prepare the journal entry for the payment of interest on December 31, 2016 (the third year), and the balance sheet presentation of the bonds on that date.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91624330

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