Question

exercise 10-4 (algo) straight-line: amortization of bond discount lo p2
tano company issues bonds with a par value of $81,000 on january 1, 2027. the bonds annual contract rate is 6%, and interest is paid semiannually on june 30 and december 31. the bonds mature in three years. the annual market rate at the date of issuance is 8%, and the bonds are sold for $76,753.
complete this question by entering your answers in the tabs below.
required 1 required 2 required 3
prepare a straight-line amortization table for these bonds.
note: round your intermediate calculations to the nearest dollar amount.
semiannual period-end unamortized discount carrying value
(0) 01/01/2027
(1) 06/30/2027
(2) 12/31/2027
(3) 06/30/2028
(4) 12/31/2028
(5) 06/30/2029
(6) 12/31/2029
< previous required 2 >

Explanation:

Step1: Calculate total bond discount

$\text{Total Discount} = \$81,000 - \$76,753 = \$4,247$

Step2: Calculate semiannual discount amortization

Number of semiannual periods = $3 \times 2 = 6$
$\text{Semiannual Amortization} = \frac{\$4,247}{6} \approx \$708$

Step3: Compute initial unamortized discount and carrying value

• 01/01/2027: Unamortized Discount = $\$4,247$; Carrying Value = $\$76,753$

Step4: Calculate values for each period

For each semiannual period:
Unamortized Discount = Previous Unamortized Discount - $\$708$
Carrying Value = Previous Carrying Value + $\$708$
(Adjust final period to ensure unamortized discount = 0: final amortization = $\$4,247 - 5 \times \$708 = \$4,247 - \$3,540 = \$707$)

Answer:

Semiannual Period-End	Unamortized Discount	Carrying Value
(1) 06/30/2027	$\$4,247 - \$708 = \$3,539$	$\$76,753 + \$708 = \$77,461$
(2) 12/31/2027	$\$3,539 - \$708 = \$2,831$	$\$77,461 + \$708 = \$78,169$
(3) 06/30/2028	$\$2,831 - \$708 = \$2,123$	$\$78,169 + \$708 = \$78,877$
(4) 12/31/2028	$\$2,123 - \$708 = \$1,415$	$\$78,877 + \$708 = \$79,585$
(5) 06/30/2029	$\$1,415 - \$708 = \$707$	$\$79,585 + \$708 = \$80,293$
(6) 12/31/2029	$\$707 - \$707 = \$0$	$\$80,293 + \$707 = \$81,000$