Question

On January 1, 2020, Scottsdale Company issued its 11% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued for $$3,385,058 to yield 9%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is:

Answer 1

$269,153

Step-by-step explanation:

Dr Cash 3,385,058

Cr Bonds payable 3,000,000

Cr Premium on bonds payable 385,058

premium amortization year 1 = ($3,385,058 x 9%) - $330,000 = $304,655 - $330,000 = -$25,345

premium amortization year 2 = ($3,359,713 x 9%) - $330,000 = -$27,626

premium amortization year 3 = ($3,332,087 x 9%) - $330,000 = -$30,112

premium amortization year 4 = ($3,301,975 x 9%) - $330,000 = -$32,822

premium's balance = $269,153